Finally, the rents in some areas are adjusted upwards because of legislative mandates.
At the same time, the methodology used to develop the fair market rents has advantages, chief among them that it is straightforward and can be applied to all areas of the country. Indeed, from the perspective of adjusting the poverty thresholds, there is an attraction to using the methodology with decennial census data. Although the census database is limited in content, it provides adequate sample sizes and an ability to estimate housing costs on a consistent basis for the entire nation (at least for the census year).
The BLS Family Budgets Program included an allowance for shelter costs in the intermediate budget that represented a weighted average of costs for a standard five-room rental unit, and a standard fiveor six-room owned home that was purchased by the family 6 years prior to the budget reference date. The units that were priced met recommendations on essential household equipment, adequate utilities, and neighborhood location, originally made by the American Public Health Association and the U.S. Public Housing Administration (see Expert Committee on Family Budget Revisions, 1980). Weight variations between areas assumed varying quantities and types of fuel associated with climatic differences.
BLS developed shelter cost indexes for 40 metropolitan areas and the nonmetropolitan areas of the four census regions. Excluding Alaska and Hawaii, the BLS sample area with the highest shelter costs in 1973 was Boston, with an index value of 1.48; the area with the lowest shelter costs was Austin, with an index value of 0.68. When the measurement is limited to differences in rental costs, there was somewhat less dispersion in the index values across areas: in 1973 the BLS area with the highest rental costs was San Francisco, with an index of 1.44; the areas with the lowest rental costs were Austin and Baton Rouge, with indexes of 0.76 (Sherwood; 1975:14).
Like the HUD approach, the BLS approach to estimating shelter costs for the Family Budgets Program can be criticized for not controlling sufficiently for differences in the characteristics of the housing units for which cost data were obtained. Hence, it is likely that interarea price differences were affected by differences in quality, but, as Sherwood (1975) pointed out, how much variation is attributable to price differences and how much to quality differences is unknown. Also, it is not known whether the price differentials would have been the same for other specifications of units, such as larger or smaller units or homes purchased more recently than 6 years ago.
Rosen (1978) further criticized the BLS approach of specifying, a priori, a particular set of housing characteristics to use in developing interarea housing cost indexes. He argued that the BLS method ignores the possibility of factor