Due to PHADA and its members’ advocacy efforts on this issue, on September 15 HUD announced an opportunity for relief for Rental Assistance Demonstration (RAD) projects facing extraordinary costs. HUD’s Office of Recapitalization notes that public housing properties that converted under RAD receive annual rent increases based on HUD’s Operating Cost Adjustment Factor (OCAF). However, in recent years, the standard OCAF has been insufficient for some RAD projects experiencing extraordinary circumstances due to rising operating costs.
To help address these rising operating costs and insufficient rent adjustments, owners of RAD projects now have the option to request a one-time good-cause exception to the use of the standard OCAF. Owners must be able to demonstrate that cost increases are beyond their control and are causing severe financial strain. HUD has provided an overview of the submission and review process here and PHADA encourages you to review the document in full before submitting a request.
Key details of the process are included below:
- Apply for an exception to the use of the standard OCAF starting on September 30, 2025.
- Requests must be submitted through the RAD Resource Desk under the Post-Closing Page for the RAD project for which the exception is being requested.
- If a request is approved, HUD will issue an approval letter and offer an Alternative OCF based on available administrative data for operating cost increases in the project’s market.
- If the owner deems this Alternative OCF is insufficient to resolve the project’s economic viability issues, the owner can decline and instead provide detailed information to HUD to complete an in-depth project-specific analysis, which HUD states will take at least 6 months to complete.
- When an Alternative OCF is approved, the adjustment will take effect at the next contract anniversary date, subject to the availability of funding.
- The rent as adjusted by the Alternative OCF will set the new baseline to be adjusted annually through the remaining term of the current HAP contract, using standard rent adjustment procedures.
- For assistance, HUD encourages owners to send their questions to: resourcedesk@radresource.net.
The Office of Recapitalization will hold office hours on this topic on September 25 at 2:00 pm ET. Agencies may join the Teams call on that date here. Additional login information is below:
- Meeting ID: 251 262 856 0367
- Passcode: d7Na3iB2
- Dial in by phone: 202-510-9533, 53036552#
PHADA appreciates the Office of Recapitalization’s efforts to consider exceptions to the use of the standard OCAF to ensure the long-term economic viability of critical affordable housing units throughout the U.S.