How It WorksFind a HangarList Your Hangar
Get StartedGet a Demo
How It WorksFind a HangarList Your HangarSign In
Get StartedGet a Demo
Get Started
Back to blog

You Do Not Have to Charge Market Rent to Your Hangar Tenants

T

The Hangar Direct Team

hangardirect.com

complianceFAArevenue

There is a persistent belief that the FAA requires fair market value for hangar rent. It does not, and believing it causes real damage. Here is what Grant Assurance 24 actually says.

There is a belief circulating among airport directors that the FAA requires them to charge fair market value for hangar rent, and that a below-market T-hangar rate is a grant assurance violation waiting to be discovered.

It is not true, and believing it causes real damage. Directors raise rates they did not need to raise, pick fights with based aircraft owners they did not need to have, and cite a federal requirement that does not exist.

The rule is more specific than that, and the specificity is the whole point. This is a general explainer, not legal advice. Your FAA Airports District Office and your airport attorney are the authorities on any specific situation.

Two Different Standards for Two Different Tenants

Federal policy applies one standard to aeronautical use of airport property and a different standard to non-aeronautical use.

Aeronautical rates must be fair and reasonable. The FAA's 2013 Policy Regarding Airport Rates and Charges, published at 78 Federal Register 55330 on September 10, 2013, states that rates, fees, rentals, landing fees, and other service charges imposed on aeronautical users for aeronautical use of airport facilities must be fair and reasonable, and may not unjustly discriminate against aeronautical users. There is no fair market value requirement in that sentence.

Non-aeronautical rates must be fair market value. This is where FMV lives. The FAA's Revenue Use Policy treats charging less than fair market value rental rates to non-aeronautical users, including the sponsor itself, as an example of unlawful revenue diversion.

The FAA's own hangar use FAQ puts the two side by side about as plainly as an agency can. It explains that if a hangar is being used for an aeronautical purpose, the sponsor will generally charge the airport's standard rate for aeronautical leases, which should recover the airport's costs but which may be less than fair market rent. If the hangar is used for an interim non-aeronautical purpose, the sponsor must charge a fair market rent.

Read that again if you have been told otherwise. The FAA said the aeronautical rate may be less than fair market rent.

What Grant Assurance 24 Actually Requires

The text is short. A sponsor agrees that it "will maintain a fee and rental structure for the facilities and services at the airport which will make the airport as self-sustaining as possible under the circumstances existing at the particular airport, taking into account such factors as the volume of traffic and economy of collection."

Three things in that sentence do a lot of work.

"Fee and rental structure." The obligation attaches to the structure as a whole, not to any single lease. You are not audited tenant by tenant. A low rate on one hangar is not a violation; a rate structure that makes no serious attempt at self-sufficiency is a different matter.

"As possible." Not "self-sustaining." As self-sustaining as possible. The standard has a built-in acknowledgment that some airports cannot get there.

"Under the circumstances existing at the particular airport." This is the clause that protects a small airport in a thin market. The circumstances are part of the standard, not an excuse from it.

FAA Order 5190.6C, the Airport Compliance Manual that took effect February 20, 2026 and replaced Order 5190.6B, carries the same framing: the sponsor is expected to recover its costs through fair and reasonable fees, rentals, or other user charges that will make the airport as self-sustaining as possible under the circumstances existing at that particular airport.

AOPA's read of FAA practice is that the agency will generally not investigate the reasonableness of a general aviation airport's aeronautical fees absent evidence of a progressive accumulation of surplus aeronautical revenues. In other words, the enforcement concern historically runs toward charging too much, not too little.

Where Below-Market Rent Does Become a Problem

There are three situations where a low rate genuinely creates exposure.

The tenant is not actually doing anything aeronautical. If someone is paying your aeronautical hangar rate and using the space to store a boat or run a contracting business, they are getting a non-aeronautical use at an aeronautical price. That implicates both the self-sustaining obligation and the Revenue Use Policy, because aviation revenue is effectively subsidizing a non-aviation activity. This is the scenario the 2016 hangar use policy was written to address, and it is why that policy suggests writing a lease provision that adjusts the rate to fair market value for any non-incidental non-aeronautical use.

The sponsor is the tenant. The Revenue Use Policy calls out below-market rates to non-aeronautical users "including the sponsor." A city parks department storing mowers in an airport building rent-free is the textbook version.

The structure produces nothing. Rates so low across the board that the airport makes no meaningful contribution to its own costs, with no articulated reason, is where Grant Assurance 24 has teeth.

Note what is missing from that list. A T-hangar rented to a based Cessna at a rate below what a self-storage operator would charge is not on it.

Below-Market Rent to Nonprofits Is Expressly Allowed

Museums, EAA chapters, flying clubs, Civil Air Patrol units, and similar organizations come up constantly, and the answer is more permissive than most directors expect.

Section VII.E of the Revenue Use Policy provides that an airport sponsor, at its discretion, may provide access to airport property at less than fair market rent to aviation museums and other non-profit aviation-related organizations, including aviation-focused community-based organizations.

The FAA does attach a limit. Such organizations have the same access to vacant hangar space as other activities that do not actually require a hangar for aviation use, and they should not displace aircraft owners who need storage unless the organization's own activity involves using and storing operating aircraft.

So a discounted rate to the local EAA chapter is a policy choice you are allowed to make. Giving them the last available hangar while three aircraft owners sit on the waiting list is the part that creates a problem.

Your City Can Subsidize the Airport

This one causes needless anxiety, so here it is plainly.

The grant assurances restrict money flowing off the airport. They do not restrict money flowing onto it. A city or county putting general fund dollars into its airport is not revenue diversion. Diversion runs the other direction.

Many small airports operate with a local subsidy. That may be a political problem in your council chambers. It is not a federal compliance problem.

Grant Assurance 25 governs where airport revenue goes: all revenue generated by the airport must be expended for the capital or operating costs of the airport, the local airport system, or other local facilities directly and substantially related to air transportation, or for noise mitigation. Nothing in that sentence limits what the city may contribute.

What This Means Practically

If you have been putting off a rate increase because you believed a federal requirement was bearing down on you, you have more room than you thought. Raise rates because your costs justify it, because your comparables support it, or because your council asked for it. Not because you think the FAA is making you.

If you have been leaving a non-aeronautical tenant at an aeronautical rate because raising it would be awkward, that is the actual exposure, and it is worth fixing.

The practical checklist:

  • Know which of your hangars are in aeronautical use and which are not. That classification, not the rate, is what determines the standard that applies.
  • Put a fair market value adjustment clause in your leases so a use change triggers a rate change automatically instead of a confrontation.
  • Document why your rate structure is what it is. "As self-sustaining as possible under the circumstances existing at the particular airport" is a defensible position, but only if you can describe the circumstances.
  • If you discount for a nonprofit, write down the decision and make sure it is not displacing aeronautical demand.

The FAA gave sponsors real latitude on aeronautical rates. Most of the airports worrying about this could use more of it.

Keeping track of which hangars are in aeronautical use, what each lease says about rate adjustments, and when those adjustments are due is exactly the kind of record the Hangar Direct platform maintains, so the answer lives in a system instead of someone's memory.

Sources

Know which standard applies to every hangar

The aeronautical vs non-aeronautical classification is what determines the rate standard, and it changes when tenants change. Book a walkthrough and see how airports keep that classification current.

Book a walkthrough
Back to all posts