msas defined

Understanding the Changing MSA Definitions and Fair Market Rents

PAUL HENKEL, Chief of ResearchTennessee Housing Development Agency

Phone: 615-741-9658E-mail: [email protected]

Additional Contributor: Hulya Arik, Sr. Research Analyst

Presented at the Tennessee Association of Housing and Redevelopment Authorities Spring Workshop, April 24, 2006.

* Federal Register v.63, N.244, p.70526** Frey WH, Wilson JH, Berube A and Singer A (2004) Tracking Metropolitan American into the 21st Century. The Living Cities Census Series, November 2004, The Brookings Institution.

Metropolitan areas*

• First defined in 1949• Intended for preparation, presentation, comparison of data

“The original metropolitan statistical area concept was predicated on the model of a large central city of over 50,000 residents that served as a hub of social and economic activity for surrounding counties.” **

Metropolitan areas (cont’d)MSAs have changed between 1950 and 1993 due to the recognition of new areas as they reached the minimum required city or urbanized area population.This shift in residential and commuting patterns was influenced by such developments as:

* http://en.wikipedia.org/wiki/Tyres

• The Interstate Highway System also known as the Dwight D. Eisenhower National System of Interstate and Defense Highways, authorized by the Federal-Aid Highway Act of 1956.*

• The invention of the radial tire in 1946 by Michelin and its widespread use in the U.S. beginning in the 1970s.*

Metropolitan areas (cont’d)MSAs were designed as a way of presenting information, not as an analytical tool for understanding processes or informing programs.

Additionally, MSAs are what I would call “metrocentric”.

That is…they were developed to present urban information, and as such were not very effective at dealing with presenting the complexities of rurality.

This has not changed within the new MSA system.

METROPOLITAN AREAS,1950196319711973

Nashville SMA adds Sumner and Wilson CountiesFirst use of Metropolitan Areas for Statistical PurposesKnoxville SMA adds Union County

Memphis SMSA adds Tipton CountyNashville SMSA adds Robertson, Cheatham, Dickson, Williamson, and Rutherford CountiesChattanooga SMSA adds Sequatchie and Marion CountiesKingsport-Bristol SMSA is created with Hawkins and Sullivan Counties


Clarksville-Hopkinsville SMSA is created with Montgomery CountyKingsport-Bristol SMSA is renamed and expanded to include Washington, Carter, and Unicoi Counties


Jackson MSA is created and includes Madison CountyKnoxville MSA is expanded to include Grainger, Jefferson, and Sevier Counties


Memphis MSA is expanded to include Fayette CountyJackson MSA is expanded to include Chester CountyChattanooga MSA is reduced excluding Sequatchie CountyKnoxville MSA now excludes Grainger and Jefferson Counties and is expanded to include Loudon County

METROPOLITAN AREAS,

1993

Now, with MICROPOLITAN areas!

NEW METROPOLITAN AREAS

New Metropolitan areasThis lack of conceptualization of non-metro areas is reflected in the definition put forth by the OMB:

The general concept of a Metropolitan Statistical Area or a Micropolitan Statistical area is that of an area containing a recognized population nucleus and adjacent communities that have a high degree of integration with that nucleus. (Fed. Register v.65, n.249, p.82228)

…beginning in 1996, previous definitions were reviewed by the Metropolitan Area Standards Review Committee and revised to be effective with the release of the 2000 census

New Metropolitan areas (cont’d)The inclusion of outlying counties, or rather the exclusion of non-integrated counties is based only on commuting patterns.According to Brookings Institution research*:

• “The extent of urban areas has…changed, due to population growth and new definitional criteria….[thus increasing] the number of central counties [and] enlarging the potential commuting fields [while at the same time] new commuting criteria…are more restrictive…”

* Frey WH, Wilson JH, Berube A and Singer A (2004) Tracking Metropolitan American into the 21st Century. The Living Cities Census Series, November 2004, The Brookings Institution.

New Metropolitan areas (cont’d)

These new commuting ties, used to qualify an outlying county for inclusion into a metro area, equate to at least 25% of the working population.*

Inclusions of the Micropolitan Statistical Area has broadened the applicability of the new standards to a much greater proportion of previously classified non-metropolitan areas.

* Miller K (2004) What is Rural? Rural by the Numbers, No. 1. Rural Policy Research Institute.

New Metropolitan areas (cont’d)

Source: Frey WH, Wilson JH, Berube A and Singer A (2004) Tracking Metropolitan American into the 21st Century. The Living Cities Census Series, November 2004, The Brookings Institution.

OLD AREA DEFINITIONS

Old MSA............ Cities or urbanized areas with at least 50,000 people

(Counties included/excluded based on employment, commuting, and pop. density criteria)Primary MSA....... county(s) in a metro area that with at

least 100,000 people.Combined MSA....aggregation of 2+ PMSAs.Central City.......... Census designated place was

automatically designated.

Metropolitan areas (cont’d)


NEW AREA DEFINITIONS:

Core-Based Statistical Area...Nucleus around which there is a high degree of integration.

Can be metro (50,000+) or micro (10,000-49,999).

MSA...At least one urbanized area with at least 50,000 people .(Counties included based on commuting criteria)

Micropolitan Statistical Area...At least one urbanized area with at least 50,000 people.

(Counties included based on commuting criteria)

CBSAs in Northern Middle TNCBSAs and SAs in Northern Middle TNMETROPOLITAN

METROPOLITAN

MICROPOLITAN

MICROPOLITAN

MICROPOLITANMICROPOLITAN

MICROPOLITAN

Metropolitan areas (cont’d)


Non-metro

MicropolitanStatistical

AreaNon-CBSA

Consolidated MSAor

Primary MSAMSA

MSA

New Metropolitan area Factoids


FACTOIDS:

Under the old system, 20% of the US land area was classified and considered “metropolitan”, the remaining 80% was considered “non-metropolitan”.

Under the new system, 20% of the US land area is classified “metropolitan”, but

Of the remaining 75% that is “non-metropolitan”, a further 20% are classified “micropolitan”.

New Metropolitan area Factoids (cont’d)


FACTOIDS:

This means that while previously only 848 counties in the US were previously “included” in the MSA definitions, coverage has expanded to 1,779 counties that are somehow “included”: 1089 in MSAs and 690 in mSAs.

This expands coverage of the population from 80% of the population nationwide to 93%.



FACTOIDS:

The new definitions alter the social and economic attributes of many metropolitan areas.

These new standards provide for a standard choice for analyzing or ranking metropolitan areas across the country, but more significantly:

Offer several ways for local analysts to define their area.



FACTOIDS:

This is particularly relevant for Tennessee where we rank 10th in the number of mSAs (n=20) nationwide.

This provides for the ability to better use of Census data, which has developed into a key tool for analytical research (regardless of whether or not its original design was intended for this purpose).



FACTOIDS:

State agencies like the Tennessee Housing Development Agency, which rely on the “hard data” provided by the US Census Bureau, can now better design and evaluate programs to serve Tennessee when using MSA data.

This significant revision, overdue after 50 years of basically unaltered methodology, better reflect the mosaic that is Tennessee and allow for Census data to be used to better develop a more multi-layered understanding.

Establishment of Fair Market RentSection 8 of the U.S. Housing Act of 1937 authorizes housing assistance to aid lower-income families in renting safe and decent housing.Housing assistance payments are limited by FMRs established by HUD for different areas.The FMR for an area is the amount that would be needed to pay the gross rent (shelter rent plus utilities) of rental housing that is:

• privately owned• decent, • safe • modest • with suitable amenities.

Uses of Fair Market RentThe primary uses of FMRs are: • To determine payment standard amounts for the

Housing Choice Voucher program• To determine initial renewal rents for some

expiring project-based Section 8 contracts• To determine initial rents for housing assistance

payment (HAP) contracts in the Moderate Rehabilitation Single Room Occupancy program

• To serve as a rent ceiling in the HOME rental assistance program.

Current Fair Market Rent

The FMRs for FY2006 were based on a change in metropolitan area definitions: the county-based statistical areas as defined by OMB, with some modifications.The only modifications made are to permit OMB-defined metropolitan areas to be divided into more than one FMR area when necessary to minimize changes in FMRs due solely to the use of the new definitions.

In general, any parts of old metropolitan areas, or formerly non-metropolitan counties, that would have more than a 5 percent increase or decrease in their FMRs as a result of implementing the new OMB metropolitan definitions are defined as separate FMR areas.

The FY2006 Fair Market Rents were proposed on June 2, 2005 and effective on October 1, 2005.

Public Comments on Fair Market RentDuring the comment period, which ended August 1, 2005, HUD received 58 public comments on the proposed FY2006 FMRs. • Over one-half of the comments concerned the

changes in FMRs as a result of using the new OMB metropolitan definitions.

• Other comments opposed reductions in their FMRs as a result of Random Digit Dialing (RDD) surveys.– Low FMRs were cited as a reason for program difficulties. – Most of the public comments received lacked the data

needed to support FMR changes. – All RDD results are being implemented with the exception

of the reduction for New Orleans.

Justifications for Metropolitan Area Updates to Fair Market Rent

These definitions have advantages: • Based on more current (2000 Census) data• Use a more relevant commuting interchange• Generally provide a better measure of current

housing market relationships.

The FY2006 FMRs are based on current OMB metropolitan area definitions.

According to the Brookings Institution*

“Over the past five decades…the decentralization of both employment and population in many urban areas have served to disperse the ‘core’ well beyond the largest city into smaller clusters of previously ‘suburban communities’.”

* Frey WH, Wilson JH, Berube A and Singer A (2004) Tracking Metropolitan American into the 21st Century. The Living Cities Census Series, November 2004, The Brookings Institution.

Justifications for Metropolitan Area Updates to Fair Market Rent (cont’d)

Bellevue14 miles22 min.

Brentwood17 miles27 min.

Old Hickory18 miles29 min.

Murfreesboro37 miles50 min.

Columbia51 miles1h 10min.

Clarksville39 miles54 min.

Hendersonville18 miles28 min.

NASHVILLE

CENSUS COMMUTETime: 25.9 minutesUp 14% from 1990

AVERAGE COMMUTE Distance: 19.7 miles

Time: 29.0 minutes

24

24

65

40

40

65

Distance: 26 milesTime: 39 minutes

Steps used in Developing and Updating the Final FY 2006 FMRs

• Formation of the final FY 2006 FMR areas • The 2000 Census benchmark• Incorporating information from Revised Final FY

2005 FMRs, and• Updating to FY 2006 including information from

local RDD survey data

Formation of the final FY 2006 FMR areas

• HUD examines the new metropolitan areas to see if they are different from FY 2005 FMR areas

• HUD compares the 2000 Census 40th Percentile Base Rents for each part of the new metropolitan area against the 2000 Census 40th Percentile Base Rent for the entire new area (called “evaluated Metro FMR Areas”)

Evaluating the 2000 Census benchmark

• If any of the evaluated Metro FMR Areas have Base Rents that differ from the Base Rent for entire area by at least 5%, HUD establishes them as separate “HUD Metro FMR Areas (HMFA)” within the new metropolitan area and assigns them their own 2000 Census Base Rent

• If an evaluated Metro FMR Areas does not differ from the entire metropolitan area 2000 Census Base Rent by at least 5%, then it gets the 2000 Census Base Rent for the entire metropolitan area

An Concrete Example

• Nashville-Davidson-Murfreesboro, TN MSA is expanded due to 2003 changes to MSA definitions.

• The change adds five previously excluded counties (Cannon, Hickman, Macon, Smith and Trousdale) not previously within in the old MSA.

• According to methodology, each new addition has to be individually checked against the 2000 Census 40th Percentile Base rents to see if it differs by at least 5%.

• Because Cannon and Trousdale Counties have an insufficient 2000 Census 2-bedroom recent movers (renters), necessary to set their own individual FMR, their FMRs were unable to be effectively and reliably established. Therefore they were merged into the Nashville-Davidson-Murfreesboro, TN HUD Metro FMR Area.

• But for Hickman, Macon, and Smith Counties RDD surveys were able to produce reliable data resulting in each county becoming a separate, HUD-defined metropolitan FMR Area.

An Concrete Example (cont’d)

• The Nashville-Davidson-Murfreesboro, TN HUD Metro FMR Area is a HUD-defined metropolitan FMR that is made up of the following counties: Cannon, Cheatham, Davidson, Dickson, Robertson, Rutherford, Sumner, Trousdale, Williamson, and Wilson Counties, becoming part of the larger Nashville-Davidson-Murfreesboro, TN MSA.

• The larger Nashville-Davidson-Murfreesboro, TN MSA includes also Hickman, Macon, and Smith Counties, each as their own HUD-defined metropolitan FMR Area.

An Concrete Example (cont’d)

Nashville-Davidson-Murfreesboro MSA

FAIR MARKET RENT CHANGES, 2005-2006

Counties highlighted in RED gained at least 14% in FMRCounties highlighted in YELLOW gained from 6- 13% in FMR

FAIR MARKET RENT JUMPERS

These four counties were included in their Respective MSA due to a lack of recent mover,s making the RDD survey unreliable.

Group 1

These 20 counties were assigned the floor FMR: “the median county rent for all non-metropolitan counties.”

FAIR MARKET RENT JUMPERSGroup 2

• The new MSA definitions are not perfect, but they are much improved and more reflective of the complexities of urban development, nationwide and in Tennessee.

• These improvements will allow agencies, like THDA, that need to understand housing in Tennessee, both across the state and a the local level, a stronger footing upon which to stand, and move forward.

• But change is not easy at the state level.

What to take home

• Fair market rents have changed across the state.

• For some areas the change has been significant.

• The changes, based in the metrocentric, new MSA definitions now used, are closer to representing accurately conditions across the state of Tennessee.

• But change is not easy at the MSA and mSA level.

What to take home (cont’d)

• Efforts to build upon the Census 2000 reporting, through Random Digit Dialing surveys to more accurately reflect true changes in Fair Market Rent are utilized whenever possible to do so.

• But the results are far from perfect.

• And change is not easy at the local level, particularly when budgets are thin, programs are strained, and the need is great.


• Some counties, for nothing more than a lack of recent movers, have been included in CBSAs that might less-than-accurately reflect their true conditions. (For example: Trousdale and Cannon Counties)

• But other counties, have been substantially, significantly and positively redefined, the Micropolitan Areas.

• These go a long way towards bridging the gap between the old MSA definitions which defined 80% of America as “non-metropolitan” towards recognizing the complexity of micro- and extra-urban areas.


Thank you very much for your attention.

PAUL HENKEL, Chief of ResearchTennessee Housing Development Agency

Phone: 615-741-9658E-mail: [email protected]

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