When you’re searching for an apartment, it’s smart to compare listed rents for similar buildings in your area. But you may also want to consider another lesser-used metric in your research: fair market rents.
FMRs are a metric used by the Department of Housing and Urban Development to determine how much money to allocate toward housing assistance in a given area, such as vouchers and other programs, says Jacob Channel, a senior economist at LendingTree.
In technical terms, FMRs are “estimates of 40th percentile gross rents for standard quality units within a metropolitan area or nonmetropolitan county,” according to HUD. They are evaluated based on the rent of “recent movers” who have moved within the past 15 to 22 months.
That recency might better reflect what the housing market looks like at the current moment, rather than several years prior, says Frank Muraca, the assistant director of data and analytics of the Development Finance Initiative at the University of North Carolina at Chapel Hill’s School of Government. But such specific material might shrink the sample size in less densely populated areas, he adds.
“The quality of fair market rent as a metric really depends on the quality of the Census data for that,” Muraca says. “So, if you’re in a really rural community, and the Census only has one or two samples of renters and what rent they pay, that community doesn’t have very good data about what the average rent is for that area, as opposed to say, somewhere like a major metro area.”
DON’T MISS: How to master your money and grow your wealth
Though the methodology can cause challenges, it still might be a good idea to casually monitor FMRs, even if you aren’t in a housing assistance program, Channel says.
That’s because understanding FMRs can give you context into how your market is changing, he says. If your rent increases exponentially more than what the FMR is in your area, that could a good talking point to address with your landlord.
Additionally, if FMRs are rising in your market, you won’t necessarily be blindsided by a potential rent increase, Channel says. You can search for FMRs in your area on the HUD website.
However, it is worth noting that because the methodology is shifting often, FMRs might increase even if rents aren’t increasing generally, says Muraca.
The rent that you’re willing to pay is ultimately dependent on what your housing needs are, he says. He suggests that people searching for rentals conduct their own research, whether that’s through online listings or by visiting units in-person.
That includes looking into average and median rent prices in your area, in addition to FMRs, which might ultimately give you a more complete picture of your market, says Channel.
“Anyone who’s tried to rent an apartment before, especially in a major metropolitan area, has found that it’s a fairly daunting and confusing process a lot of the time,” he says. “And so there’s really no better way to familiarize yourself with the market and know whether or not you’re getting a good deal than by looking holistically at that market.”
How you can negotiate your rent
When it comes to negotiating rent, it’s a numbers game, but it’s also about building relationships, says John Bartlett, the executive director of the Chicago-based Metropolitan Tenants Organization.
In a rental market that’s seen so much scarcity, landlords have typically been holding the cards lately, making negotiating difficult, he says. But it’s not necessarily impossible.
Start by taking note of things you and your potential landlord might have in common. That way, when you start discussing the price of rent, you’re already operating on a friendly basis, says Bartlett.
Additionally, if you know someone who lives in the building, they might be able to vouch for your character, which could knock your rent down a bit, he says.
“It’s all about who you know and what you know,” Bartlett says. “It’s about relationships. Always keep that firmly in mind, that that’s what negotiating, particularly rent, is about: negotiating relationships.”
Some other things to emphasize are your connections to your past landlords, especially if you’re leaving on good terms, and if you have a steady income.
If the rent still isn’t able to be reduced, be honest about your situation, but don’t abandon the relationship you’ve developed with the landlord, Bartlett says.
“If it’s a little too much or something, I would more likely say you need a little bit of time to look through your budget [to] make sure you can do this … just so that you don’t close the door,” he says.
Want to master your money this fall? Sign up for CNBC’s new online course. We’ll teach you practical strategies to hack your budget, reduce your debt, and grow your wealth. Start today to feel more confident and successful. Use code EARLYBIRD for an introductory discount of 30% off, now extended through September 30, 2024, for the back-to-school season.
Plus, sign up for CNBC Make It’s newsletter to get tips and tricks for success at work, with money and in life.
