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New HUD Calculation Method Doubles Annual Budget Increase

After advocacy by LeadingAge National and others, the U.S. Department of Housing and Urban Development (HUD) has proposed a change in the calculation of Operating Cost Adjustment Factors (OCAFs) for 2023, which is expected to improve budgets for affordable housing communities in the coming year.

OCAFs are annual factors used to adjust Project-Based Section 8 rents each year, including rents in Section 202/8s, based on market-driven cost calculations. Given the general rate of inflation and rapidly rising insurance costs for multifamily housing providers, LeadingAge National helped lead advocacy to change HUD’s approach to the OCAF. As a result, the new annual increase rate announced by HUD for 2023 is projected to be double that of 2022.

In its proposed adjustment for 2023, HUD accounts for “historically high inflation levels” by relying on recent data that reflects a period of longer than one year. In addition, for future years, HUD has proposed using more time-relevant data to calculate OCAFs.

To address insurance rate spikes, HUD proposes switching from using the Consumer Price Index (CPI) as a guide and instead relying on the Producer Price Index, among other data, to better reflect the real-time cost of property insurance.

HUD will accept comments on the proposed changes to the OCAF calculation for 30 days. Barring comments that would lead to reconsideration, the proposed changes will become effective on Feb. 11, 2023.

More information and analysis from LeadingAge National is available here.

Contact: Annalyse Komoroske Denio, akomoroskedenio@leadingageny.org, 518-867-8866