HUD HCV Guidebook § 3.5.3

Most PHAs will find that the simplified exception payment standard process described above for greater than
110 and up to 120 percent of the applicable FMR, or exception payment standards based on the SAFMR,
generally helps ensure its payment standards are competitive in the rental market. However, there may be
some circumstances where the simplified exception payment standard process does not meet the PHA needs.
Examples of these circumstances include:
          •   Situations where PHAs do not meet the criteria to receive an exception payment standard of up to
              120 percent as described in Section 3.5.2 above and determine the applicable FMR is not in line
              with local rental market demands or
          •   Situations where 120 percent of the applicable FMR is still not high enough to reflect the local
              rental market demands
PHAs may request approval from HUD to establish an exception payment standard amount that exceeds the
basic range of the applicable FMR.57 The request must be submitted to HUD in accordance with Notice PIH
2024-34.
The PHA’s request must be for an exception area within the applicable FMR area or for the entire FMR area.58
The information required to be submitted is different for each type of request.
          •   Exception Area Requests - To request approval for an exception payment standard that applies to
              an exception area, the PHA must identify the exception area in its request and provide to HUD the

53
   24 CFR 983.301(b) and (f)(3)(i); see also additional rent limitations at 24 CFR 983.304-983.305
54
   24 CFR 983.301(f)(3)(ii)
55
   24 CFR 983.301(b); see also additional rent limitations at 24 CFR 983.304-983.305
56
   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.
57
     24 CFR 982.503(d)(4)
58
     24 CFR 982.503(d)(1)

rental market data demonstrating that the requested exception payment standard amount is
            needed for families to access rental units. The rental market data must include a rent estimate
            for the applicable FMR area compared with a rent estimate for the proposed exception area (e.g.
            census tract, census tract block group, county, etc.). As an example, a PHA in a mandatory SAFMR
            area would submit a rent estimate for the exception area, which must be a smaller geography than
            the applicable FMR area (ZIP Code). Typically, for mandatory SAFMR PHAs, the exception area
            would be a census tract but could be a different geography so long as it is no smaller than a
            census tract block group. The PHA would also submit a corresponding rent estimate for the
            applicable FMR area (ZIP Code).
            For all exception area requests, the rent estimate must consist of a standard metric, such as an
            average or median rent, measured across a representative portion of the rental market by a
            reputable source. The rent estimates must include the two years preceding the current FMR year.
            For example, in FY 2025, the rent estimates should be for 2023 and 2024.
        •   Entire FMR Area Requests - A PHA may determine that they want to request an exception payment
            standard for the entire FMR area. For example, a PHA in a mandatory SAFMR area may want to
            request an exception payment standard for an entire ZIP Code. As another example, a PHA in a
            non-metropolitan county may want to request an exception payment standard for the entire
            county. PHAs requesting exception payment standards for an FMR area must submit estimates of
            the typical rent paid in the FMR area. The rent estimate must consist of a standard metric, such
            as an average or median rent, measured across a representative portion of the rental market by a
            reputable source. The rent estimates must include the two years preceding the current FMR year.
            The PHA must provide data that demonstrates the annual percentage of inflation change for the
            entire FMR area is greater than the rental inflation adjustment factor in the published FMR. For
            example, in FY 2025, the rent estimates should be for 2023 and 2024, with the annual
            percentage of inflation change reflecting the percentage increase from 2023 to 2024. HUD
            currently publishes the rental inflation factor on the HUD user webpage.59
            Please note that the exception payment standard process for an entire FMR area is different than
            a reevaluation of HUD’s determination of FMRs. That process is discussed further in Section 7 of
            this chapter.