HUD Proposes to adjust OCAF Based on Higher Inflation and Insurance Costs

Posted on November 17, 2022 by Bobbie Guidry

After advocacy from LeadingAge and others, the Department of Housing and Urban Development (HUD) has proposed a change in the calculation of Operating Cost Adjustment Factors (OCAFs) to account for high inflation and sharp increases in property insurance costs.

OCAFs are annual factors used to adjust project-based Section 8 rents annually. In its proposed adjustment for 2023, HUD accounted for "historically high inflation levels" by relying on more recent data that reflects a period longer than one year. HUD also proposed to use more time-relevant data to calculate OCAFs in future years.

To calculate the inflation factor for the insurance component, HUD proposes switching from using the Consumer Price Index to relying on the Producer Price Index, among other data, to reflect the cost of property insurance better.

Unless HUD receives comments leading to the reconsideration of these proposed changes, the changes will become effective on Feb. 11, 2023. LeadingAge is hopeful that the new data approach will benefit affordable senior housing providers struggling with relatively flat operating budget increases.