The Trainer

Determining Rent; Completing Compliant Rent Comparability Study

In this month's feature, we discussed the current challenges and market factors that influence rents. As we noted, these factors have the potential for wreaking havoc on your budget. At the same time, you must comply with HUD expectations and requirements that you stay fiscally sound and adhere to the latest rules for occupancy and determining rents. Specifically, we pointed out that rent comparability studies factor into operations at many assisted sites, particularly with the renewal of Section 8 contracts and often with requests for annual rent increases at other site types. Remember, HUD regulations require you to work with an appraiser to complete the rent comparability study, which determines the rents you could charge if your site wasn't supported by HUD assistance.

In our article on tips for compliant rent comparability studies, we pointed out that it's not a good idea to take what the appraiser has done and just hand it over to your contract administrator or local HUD office. That simply isn't good policy. Instead, you should review it carefully, even if it's going to be reviewed again at higher levels. That's because your sign-off indicates that you did exam it, and because appraisers can make mistakes. Remember, the appraiser's rent comparability study determines the rents you could charge if your site wasn't HUD-supported. Generally, to get your contract renewed or your rents increased, your rent comparability study must show that your site's rents are below comparable market rents.

TRAINER'S QUIZ

INSTRUCTIONS: Each of the questions below has only one correct answer. On a separate sheet of paper, write down the number of each question, followed by the answer you have chosen—for example, (1) b, (2) a, and so on. The correct answers (with explanations) follow the quiz. Good luck!

QUESTION #1

Because of the recession, comparable rents have dropped significantly. True or false?

1. True.

2. False.

QUESTION #2

An annual adjustment factor is a small percentage increase in rent determined by HUD on the basis of the:

1. Gross National Product.

2. Unemployment rate.

3. Consumer Price Index.

QUESTION #3

Owners of Section 8 sites have to conduct comparability studies at least every:

1. Year.

2. Three years.

3. Five years.

QUESTION #4

According to some sources, rent comparability studies are being put on hold. True or false?

1. True.

2. False.

QUESTION #5

To make appropriate comparisons in rent comparability studies, appraisers identify the:

1. Least expensive units.

2. Most expensive units.

3. Primary unit types.

QUESTION #6

When conducting market comparability studies, you should make sure that the comps used are not all in your neighborhood. True or false?

1. True.

2. False.

QUESTION #7

In conducting comparability studies, if residents prefer elevator buildings, the appraiser must:

1. Ignore this consideration.

2. Adjust the rent to account for this preference.

3. Notify HUD immediately.

QUESTION #8

It's good policy when conducting comparability studies to double-check utility adjustments. True or false?

1. True.

2. False.