The short answer
A Fair Market Rent (FMR) is the U.S. Department of Housing and Urban Development's estimate of the monthly cost of a modest, decent rental home in an area, including the utilities a tenant usually pays. HUD publishes FMRs for studios through four-bedroom homes.
How HUD sets it
For most areas, HUD sets the FMR at about the 40th percentile of gross rents paid by recent movers into typical, standard-quality rental units. That means roughly 40% of those rents are below it. It's built from Census survey data and adjusted forward for inflation and local rent trends.
Area-wide and Small Area FMRs
Classic FMRs cover a whole metro area or a non-metro county. Small Area FMRs (SAFMRs) are set for individual ZIP codes, so higher-cost and lower-cost neighborhoods get different figures. HUD requires housing authorities in some designated metro areas to use SAFMRs; others may choose to.
When it changes
HUD publishes new FMRs every fiscal year, usually effective October 1. The current figures are for fiscal year 2027.
What it's used for
FMRs are used to set Housing Choice Voucher (Section 8) payment standards and rent limits in several other programs. They're also a handy, neutral benchmark for anyone comparing rents.
What it isn't
An FMR isn't the average rent, the asking rent for a particular unit or an appraisal. New, renovated or amenity-rich homes often rent above it. Use it as one reference point.