As insurance and property management costs rise, HUD, on Dec. 17, 2024, announced updated Operating Cost Adjustment Factors as a way help housing providers maintain affordable rents while keeping up with rising expenses.
The OCAFs for eligible multifamily housing projects with project-based assistance contracts under the Section 8 program were recently published a Federal Register Notice.
These new OCAFs, HUD says, will help housing providers’ allowable operating cost adjustments better reflect rising operational expenses seen market-wide, particularly insurance costs, while ensuring that residents have access to affordable, quality homes with stable rental rates.
“As I have traveled across the nation, I have heard from property owners who have difficulty maintaining affordable rents while keeping up with rising expenses, impeding our efforts to boost the supply of available affordable homes,” said HUD Agency Head Adrianne Todman in a press release. “Today, our new adjustment factors will help families and affordable housing providers keep up with increasing housing costs.”
Adjusting OCAFs to Meet Current Housing Challenges
The Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRA) requires HUD to set OCAFs on a yearly basis to establish contract rental rates. OCAFs, which vary by state and territory, are developed with industry feedback and account for critical changes in market conditions, such as fluctuations in energy costs, labor expenses, maintenance and repairs, and insurance premiums.
According to HUD’s data, assisted multifamily properties have seen their insurance costs almost double over the last five years on average, while properties located along the Gulf and Atlantic coasts saw the largest increases.
The new OCAFs apply to eligible multifamily housing projects with contract anniversary dates on or after February 11, 2025.
Additionally, HUD is seeking public comment on the calculation methodology used to determine the 2025 OCAFs. All interested parties and members of the public are invited to submit their views, comments, and recommendations, which may be submitted electronically through www.regulations.gov or the methods described in the Federal Register Notice by January 11, 2025.
