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PHADA Comments on Notice of Certain Operating Cost Adjustment Factors for 2023

Backs Significant Increases and Advocates for Additional Considerations

On December 15, PHADA submitted comments to the Department of Housing and Urban Development (HUD) on a Notice of Certain Operating Cost Adjustment Factors (OCAFs) for 2023. The notice released OCAFs for 2023 and sought public input on two proposed technical changes to HUD’s OCAF calculation method, vintage of data and insurance component data source. Each year, the Department utilizes operating cost factors to adjust project-based assistance contracts and project-based vouchers issued under Section 8 to current market conditions.   

Compared to 2022, OCAFs nearly doubled in 2023 due to HUD’s methodological changes because of inflation and other pandemic-related economic circumstances, like sharp increases in insurance costs. PHADA and its members welcome the methodological adjustments that the Department implemented to account for historically high inflation and to reduce lag time between when OCAFs are calculated and when they go into effect. PHADA supports and consistently advocates for modifications to the OCAF methodology which would result in more accurate adjustment factors that account for current economic conditions and challenges. 

Despite efforts to improve data and reduce lag time to better reflect market conditions (and the resulting effects on operating costs), there are concerns that the increase is not adequate to effectively manage significant market changes and increased costs. While the increases in 2023 are some of the highest OCAF rates that have been seen in decades, they continue to lag national inflation rates. HUD should continue to review the current methodology for further technical adjustments to deliver an OCAF that better reflects the cost increases on the ground.

The OCAF increases will assist and support some assisted rental properties, but not all, especially public housing, where some of the nation’s most vulnerable populations, like the elderly and disabled, reside. HUD should therefore also explore ways to provide updated and more realistic inflation factors to benefit millions of people served in other assisted housing programs. PHADA requested that the Department continue to work closely with the industry to implement future adjustments, not just in the programs impacted by OCAFs, but also other critical affordable housing programs like public housing and the Housing Choice Voucher program, to ensure safety and improve quality of life for residents.

A copy of the notice can be found here, and PHADA’s submitted comment letter can be found here.

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