Part A: Rents Charged (lines 1 through 5)

Before the rents for comparable units can be adjusted for differences from the subject, they must be adjusted for conditions at the comparable project itself. This section makes adjustments that are primarily internal to each individual comparable and produces an effective rent. Subsequent sections adjust each comparable’s effective rent by comparing the comparable to the subject project.

Line 1. $ Last Rent/Restricted? In the “data” column, the RCS appraiser must enter the rent at which this unit type was last leased. This must be a rent that was actually paid; the RCS appraiser must not enter an asking rent which has not yet been achieved. In the adjustments column, the RCS appraiser must enter “Y” if the unit is rent restricted and “N” if it is not. Rent restricted units include those that are subject to rent control, rent stabilization or other restrictions on the unit rent. (e.g., LIHTC, HOME, HOPE VI, and 236/BMIR/Rural Development Section 515 units). The RCS appraiser must identify the specific reason for a yes answer in the narrative explanation of adjustments. Using a comparable from an affordable/restricted project should be only a “last resort,” as adjustments that would need to be made to line items 2 through 39 for a restricted comparable are inherently subjective. However, rent restricted units could be used as comparables when they reasonably represent market rents. Units in market areas with rent control may reasonably represent a market if they were leased recently, and should not be excluded solely on the basis of the rent control. Using a comparable from other categories of project types, such as independent or assisted living facilities or masterplanned retirement communities, for an age-restricted Section 8 project, may be difficult to justify because tenants at those types of projects choose them over conventional apartment projects due to the non-shelter services offered at such facilities. In particular, a comparable property that offers a daily meal or meals included in the monthly rent poses specific challenges with regard to determining appropriate rent adjustments.

Line 2. Date Last Leased. In the data column, the RCS appraiser must enter the date (month/ year) that unit type was most recently leased. This should be the date the most recent lease for the rent on Line 1 became effective. The RCS appraiser should make an adjustment here only if the rental market has changed significantly between the date on this line and the date of the RCS appraiser’s analysis. Adjustments here should be infrequent, as the RCS appraiser should be using only recent lease transactions to begin with. This adjustment may be needed when the comparable is at full occupancy and has had no turnover for an extended period. If market conditions have not changed, the RCS

Appendix 9-1-1 – Published March 2023

4

appraiser should not adjust even if considerable time has elapsed since Line 1’s rent became effective.

Line 3. Rent Concessions. The RCS appraiser should evaluate if the comparable is offering initial rent or renewal concessions. The RCS appraiser must enter “Y’ or “N”, and may enter a negative adjustment to reflect the value of the concession, as appropriate. The RCS appraiser must prorate the concession over the lease period. For example, the RCS appraiser would make a ($33) adjustment for one month free on a 12-month lease (requiring 11 monthly rent payments), at $400 /month. If the free month is instead offered as an add-on before or after 12 months of payments, the adjustment in this example would be less ($31).

Line 4. Occupancy percent for Unit Type. The RCS appraiser must consider only the unit type represented by the comparable. The RCS appraiser should enter the approximate percent of units in that type that are occupied as of the data collection date. The RCS appraiser must not enter occupancy for all unit types at the comparable. If the comparable’s occupancy rate for the unit type under consideration is not typical of the comparable’s market, the RCS appraiser must determine if the occupancy differential is due to the rent being set too high/ too low, or due to other factors.

1. If the occupancy gap is due to factors other than Line 1’s rent level (e.g. condition or location), the RCS appraiser must not make an adjustment. The RCS appraiser should adjust only if the occupancy gap is clearly due to the rent level used on Line 1. If the comparable’s occupancy for the unit type being studied is significantly lower than the typical occupancy rate for that unit type, the RCS appraiser should adjust negatively to indicate that the rent is too high. If the comparable’s occupancy for the unit type being studied is significantly higher than the typical occupancy rate for that unit type, the RCS appraiser should make a positive adjustment.

2. If the property manager/other contact for a comparable is unwilling or unable to provide occupancy rates by unit type, the RCS appraiser should report overall occupancy for the comparable and note in the explanation for Line Item #4 that the occupancy rate is project-wide. If only overall occupancy is reported, an occupancy adjustment may be made only if the unit mix is such that the RCS appraiser can still conclude that the occupancy for the unit type is significantly different than market occupancy levels for that unit type. Example: If a project has 99 percent occupancy and 100 units (50 one-bedrooms, 50 two-bedrooms), it could still be concluded that the two-bedroom units being studied are at least 98 percent occupied. The RCS appraiser must explain how he/she arrived at that conclusion.

still conclude that the occupancy for the unit type is significantly different than market occupancy levels for that unit type. Example: If a project has 99 percent occupancy and 100 units (50 one-bedrooms, 50 two-bedrooms), it could still be concluded that the two-bedroom units being studied are at least 98 percent occupied. The RCS appraiser must explain how he/she arrived at that conclusion.

3. The occupancy adjustment is subjective, and thus it is not expected to be frequently used. Often, unusually low occupancy may have other explanations. For example, a low occupancy project may still be in initial absorption, or may be re-absorbing after a renovation or other unusual event. Conversely, an unusually high occupancy rate may be due to factors such as a high proportion of long-term tenants at below-market rates or the presence of Section 8 voucher tenants, even if new rental transactions there are being done at market rates. The use of an occupancy adjustment should thus be reserved for the specific situation where

5

Appendix 9-1-1 – Published March 2023

management is marketing units consistently at unusually low or high rental rates over a sustained period of time as a matter of policy, with measurable impacts on project occupancy.

Line 5. Effective Rent and Rent/Sq. Ft. The RCS appraiser must enter the sum of lines 2, 3, and 4. This yields an effective rent after age of the lease, occupancy, and rental concessions are taken into account. Excel-based Rent Comparability Grids will automatically calculate the total rent. After the RCS appraiser enters the unit size in Part C, the form will also display the effective rent per square foot.