Freddie Mac Examines Alternative Rental Cost Measure

The Area Median Income measure Freddie Mac uses to identify affordable rental housing fails to account for differences between micro-markets within a region.

A different model the Department of Housing and Urban Development uses to help determine Section 8 subsidized housing need addresses this concern, according to Steve Guggenmos, one of the authors of new Freddie Mac research on this topic.

HUD’s Small Area Fair Markets Rents model “breaks down a metropolitan statistical area into smaller markets to allow for the vast variances in rents and incomes in different parts of the MSA and surrounding areas,” Freddie says in a recent report.

Freddie Mac’s affordable housing parameters based on AMI are set in a 2008 law that would be challenging to change, Guggenmos acknowledges.

“We think we are serving the market in a reasonable way,” he says.

However, the research does suggest improvements could be made, says Guggenmos.

“It may be beneficial in the future to consider other measures.”