Glossary

Fair market rent

The rent a unit would command in the open market.

Definition

Fair market rent is the reference point for rent increases, assessed values, and voucher payment standards. It is estimated from comparable active listings and recent signed leases, not from what the current resident happens to pay.

Example

Two-bedroom units in a submarket list between $1,800 and $2,100 — fair market rent lands near the median of the recently leased ones.

Why it matters

Every pricing decision is a bet against this number. Price above it and you buy vacancy; price below it and you fund a discount for the whole lease term. A day of vacancy usually costs more than a modest price concession.

How it works in practice

Use signed leases over active listings — an unrented listing is an asking price, not a market. Match on bedroom count, condition, and included utilities. Refresh the estimate each leasing cycle rather than carrying last year's number forward.

Common mistakes

Anchoring on the highest comparable, ignoring concessions that lower the effective rent, and comparing units with different utility arrangements. Note that HUD publishes its own Fair Market Rent figures for voucher programs; those are a program standard, not a market estimate.

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