The Impact of Small Area Fair Market Rents on Access to High Opportunity Areas

• In Event: Federal Rental Assistance: Markets, Mobility, and Well-Being

Abstract

A growing body of research shows that the neighborhoods in which children grow up have lasting effects on economic and social mobility. Yet policies designed to help low-income families access high-opportunity neighborhoods often face tradeoffs: place-based investments are slow to materialize, while mobility-focused interventions can be expensive, administratively burdensome, or difficult to scale. This paper evaluates a policy embedded within the Housing Choice Voucher (HCV) program that seeks to expand opportunity through financial incentives rather than intensive counseling or direct placement. Specifically, we study the effects of Small Area Fair Market Rents (SAFMRs), which replace metro- or county-wide voucher rent ceilings with ZIP-code-specific ceilings, thereby increasing voucher generosity in higher-rent neighborhoods that often offer stronger schools and other markers of opportunity.

We estimate the causal effect of SAFMR adoption on children’s access to higher-performing schools using a difference-in-differences design that exploits the staggered rollout of HUD-mandated SAFMR implementation across metropolitan areas. Our primary comparison is between the 24 metro areas required to adopt SAFMRs in 2018 and a set of later-adopting metros that HUD identified as candidates and ultimately mandated to implement SAFMRs in 2025. Using a 2010–2024 household-level panel of voucher recipients with children, linked to school attendance zones and school achievement measures, we examine how SAFMR adoption affects the quality of the assigned elementary schools associated with voucher households’ residential locations.

We find that SAFMRs increased the average school achievement of neighborhoods where voucher-assisted children live, with effects that grow over time. Over the first seven years after implementation, children in treated metros are exposed to schools with achievement levels approximately 0.03 standard deviations higher, on average, than comparable children in later-adopting metros. These gains are driven by both new voucher entrants leasing up in higher-opportunity neighborhoods and existing voucher holders moving after the policy change, with especially pronounced effects among movers already in the program that experience up to 0.14SD in average school quality by year 7.

To unpack the mechanisms, we exploit within-metro variation in SAFMR-induced rent ceiling changes across ZIP codes. Constructing a novel panel of “school-ZIP areas,” we estimate how voucher households respond to localized changes in payment standards. We find that families are highly responsive to these financial incentives: a 10 percent increase in the rent ceiling produces a 22 percent increase in the number of voucher households with children in a given area. Responses are even larger (18%) in areas served by higher-achieving schools, indicating that families use the additional subsidy not simply to access more expensive neighborhoods, but specifically to access higher-opportunity ones.

Taken together, the results suggest that SAFMRs are an effective and scalable policy lever for expanding access to opportunity. By aligning housing subsidies more closely with local housing costs, SAFMRs help low-income families with children reach neighborhoods that may improve long-term life chances.

Authors

• Jason Michael Ward, University of Illinois, Chicago
  Non-Presenting Co-Author

• Jason Ward, RAND Corporation
  Presenting Author

• Susha Bentley Roy, RAND Corporation
  Non-Presenting Co-Author