How to Set Hangar Rates You Can Actually Defend

Sooner or later someone asks where your rate came from. "That's what we've always charged" is not an answer. Here is how to build a rate you can explain.

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Sooner or later someone asks where your rate came from. It might be a tenant at a public meeting, a council member during budget season, or the FAA responding to a complaint.

"That's what we've always charged" is not an answer, and neither is "we raised it by three percent." Here is how to build a rate you can explain, using methods the FAA and the airport research community actually endorse.

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First, Sort Your Property Into Two Buckets

Before any methodology, classify the space. The applicable standard depends entirely on the answer.

Aeronautical use gets the standard set out in the FAA's 2013 Policy Regarding Airport Rates and Charges, at 78 Federal Register 55330. Rates, fees, rentals, landing fees, and other service charges imposed on aeronautical users for aeronautical use must be fair and reasonable, and may not unjustly discriminate against aeronautical users.

Non-aeronautical use gets fair market value. The FAA's Revenue Use Policy treats charging less than fair market value to non-aeronautical users, including the sponsor, as a form of revenue diversion.

The FAA's hangar use FAQ draws the line explicitly: the aeronautical standard rate should recover the airport's costs but may be less than fair market rent, while an interim non-aeronautical use must be charged fair market rent.

This matters more than any spreadsheet you build afterward. Get the classification wrong and you have applied a defensible method to the wrong standard.

One more note on non-aeronautical property: fair market value is the floor, not the ceiling. Nothing prevents an airport from charging more than FMV for non-aeronautical development if the market supports it.

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The Three Valuation Approaches

ACRP Research Report 213, Estimating Market Value and Establishing Market Rent at Small Airports, published in 2020, is the best free resource on this and was written specifically because small-airport staff typically lack specialized expertise in negotiating and developing airport property.

It works from three standard appraisal approaches.

Sales comparison. What comparable properties actually rent for. This is the workhorse for hangar rates when there is an identifiable market. The survey work behind ACRP 213 found that most participants identified an appraisal or comparable rent analysis as the preferred method, and that rates at competitive and local airports were considered more appropriate comparables than rates at the subject airport itself or at generic peer airports.

That last point is worth underlining. Your own historical rate is not a comparable. It is the thing you are trying to test.

Income approach. Capitalizing the income the property produces. More relevant for revenue-producing commercial property than for a row of T-hangars.

Cost approach. Depreciated replacement cost. This is the fallback when there is no functioning market to compare against, which describes a lot of rural airports. You establish what the facility would cost to build today, depreciate it for age and condition, and derive a return.

Use more than one where you can. Two methods converging is a much stronger position than one method asserted.

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Picking Comparables Without Fooling Yourself

The comparable set is where a rate study either earns credibility or loses it.

Competitive first, then similar. A competitive airport is one a tenant could realistically move to. That is a stronger comparable than a similarly sized airport four hundred miles away, because it reflects the choice your tenant actually has.

Adjust for real differences. Hangar size and door dimensions, heated versus unheated, condition and age, whether the rate includes utilities, whether it is a ground lease or a full hangar rental, and paved versus turf access all move the number. An unadjusted list of neighboring rates is a survey, not an analysis.

Distinguish ground leases from hangar rentals. These are different products and mixing them produces nonsense. A ground lease where the tenant builds and owns the hangar is a land rate, usually quoted per square foot per year. A T-hangar rental is a facility rate, usually quoted monthly.

Write down your sources and dates. A comparable without a date is not a comparable. Rates move.

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Where to Actually Find Comparable Data

Several state aviation agencies publish this and it is free.

Montana DOT Aeronautics publishes an annual survey of general aviation airport hangar ground lease rates and fuel flowage fees, with per-airport detail across the state. Recent editions show a range of practices, including airports that use nominal ground leases as a deliberate aviation development incentive.

Wisconsin DOT Bureau of Aeronautics runs an annual rates and charges survey, and airports must respond as a condition of state funding, which makes the response rate unusually good. The most recent survey reported an average annual ground lease rate for a private hangar of 16 cents per square foot, and T-hangar rates ranging from $40 to $300 per month for a Cessna 172 with an average of $155. Forty-eight Wisconsin airports reported having T-hangars, with monthly rates available for forty of them.

That spread, $40 to $300 for the same aircraft, is the single most useful fact in this article. It tells you that a rate is not right or wrong in isolation. It is right or wrong relative to a specific market, a specific facility, and a specific set of costs.

Tennessee DOT Aeronautics publishes a hangar rates and charges interactive module with an accompanying guidebook, which returns a fair market rent value for hangars.

Georgia DOT published a statewide hangar inventory and demand analysis in 2023.

Individual airport rate schedules are public records and many are posted online. Your competitive set almost certainly publishes theirs.

ACRP Report 213 Appendix C is a dedicated list of comparable and competitive airport resources.

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When You Need an Actual Appraiser

For non-aeronautical property, the FAA has specific requirements.

Compliance Guidance Letter 2018-3, "Appraisal Standards for the Sale and Disposal of Federally Obligated Airport Property," sets the framework. The FAA developed it in response to a DOT Inspector General finding, following OIG audits that included the Venice Airport matter.

The thresholds: property valued under $1,000,000 requires one appraisal. Property worth more than $1 million requires two independent appraisers plus a review appraiser. The appraiser must be licensed by a state appraisal licensing board and work to USPAP standards. The FAA also conducts its own review.

Selling or disposing of property below fair market value is inconsistent with Grant Assurance 25 and 49 U.S.C. 47107(c)(2)(B)(i).

For routine aeronautical hangar rate setting, a full appraisal is generally not required. A documented comparable analysis is usually sufficient. But if you need a legally binding fair market value figure, particularly for a sale, disposal, or a significant non-aeronautical lease, get the appraisal. A market survey is not a substitute in that context.

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Escalation Clauses, and Getting Them Right

Most rate problems are not the initial rate. They are the twelve years afterward.

There is no FAA-mandated index. Airport leases commonly tie escalation to the Bureau of Labor Statistics Consumer Price Index for All Urban Consumers, often the All Items, U.S. City Average series, sometimes a regional variant.

A few things to get right in the drafting:

Name the exact index. Specify the population group, the item category, the geographic area, and the base period. "CPI" alone is ambiguous and creates arguments a decade later.

Avoid seasonally adjusted series. They are revised. Use unadjusted.

Pick the interval deliberately. Annual adjustments are administratively heavier but avoid rate shock. Three to five year intervals with cumulative adjustment are common in ground leases and produce larger, more noticeable jumps.

Consider a floor and a cap. A floor protects the airport in deflationary periods; a cap makes the clause easier for tenants to accept.

Say what happens if the index is discontinued or rebased. It happens.

Write the calculation out. Include the formula and a worked example in the lease. The person applying it in 2038 will not be you.

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The Part That Actually Fails

None of this is difficult. What fails is the follow-through.

An escalation clause only produces revenue if someone calculates it and bills it on schedule. A rate study only stays current if someone revisits it. Both of those depend on a person remembering, and the audit record is full of airports where nobody did.

The Northwest Arkansas Democrat-Gazette reported in 2019 that a North Little Rock lease contained a CPI escalation clause that was never collected, with an estimated $130,000 in missed payments, and that the first calculation was due in 2006. Thirteen years of a clause that existed on paper and never touched a bill.

So the last step of a rate study is not the study. It is deciding who applies the escalators, on what date, and what reminds them.

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A Workable Process

1. Classify every space as aeronautical or non-aeronautical
2. Build a comparable set from competitive and nearby airports, with dates and sources
3. Adjust for size, condition, utilities, and lease type
4. Cross-check with depreciated replacement cost where the market is thin
5. Compare against your actual operating and capital costs
6. Document the methodology in writing, including what you rejected and why
7. Adopt through your normal public process
8. Write escalation clauses precisely, with a worked example
9. Calendar the escalation dates and the next rate review
10. Actually apply them

Steps one through eight are a project. Steps nine and ten are the ones that determine whether any of it was worth doing, and they are the ones the Hangar Direct platform handles for you: it tracks each lease's escalation terms, calculates the adjustment, and tells you when it is due.

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Sources

• ACRP Research Report 213, Estimating Market Value and Establishing Market Rent at Small Airports (2020). https://nap.nationalacademies.org/catalog/25719
• Policy Regarding Airport Rates and Charges, 78 FR 55330 (Sept. 10, 2013)
• FAA Compliance Guidance Letter 2018-3, Appraisal Standards for the Sale and Disposal of Federally Obligated Airport Property. https://www.faa.gov/airports/airport_compliance/compliance_guidance/cgl-2018-03-appraisal-standards
• FAA Policy and Procedures Concerning the Use of Airport Revenue, 64 FR 7696 (Feb. 16, 1999)
• FAA, Frequently Asked Questions on FAA Policy on Use of Hangars at Obligated Airports
• Montana DOT Aeronautics, hangar ground lease rate and fuel flowage fee surveys
• Wisconsin DOT Bureau of Aeronautics, annual rates and charges survey
• Tennessee DOT Aeronautics, Hangar Rates and Charges Module and Guidebook