HUD recently released its Operating Cost Adjustment Factors (OCAFs) for the 2025 fiscal year, effective Feb. 11, 2025. OCAFs aim to balance rent increases with operational cost changes, helping Section 8 owners remain financially stable while keeping housing affordable for residents. 

These adjustments are for project-based assistance contracts issued under Section 8 of the United States Housing Act of 1937 and renewed under the Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRA) for eligible multifamily housing projects having an anniversary date on or after Feb. 11, 2025. 

Eligibility is determined by your HAP contract. If the Rent Adjustment section of your contract or plan of action refers to OCAFs, you are eligible to submit an OCAF request. Generally, properties that have renewed under MAHRA are eligible to submit OCAF rent adjustment requests.

The 2025 OCAFs can be found at https://www.federalregister.gov/d/2024-29016. For 2025, HUD established a national average OCAF of 4.8 percent, slightly lower than the 5.3 percent set in 2024. However, state-specific rates may vary, reflecting localized cost trends. For example, rates range at the state level from 3.0 percent in Connecticut to 7 percent in Louisiana. 

How OCAFs are Calculated

OCAFs are annual tools for adjusting rents in MAHRA contract renewals under Sections 515 or 524. These factors are calculated based on weighted changes in the following expense categories: wages, employee benefits, property taxes, insurance, utilities, supplies, and waste management. HUD derives these weights from three years of audited financial statements to ensure stability and accuracy.

In previous years, HUD used indices like the Producer Price Index (PPI) to estimate property insurance costs. Starting in 2025, the agency has shifted to state-level data from audited financial statements to better capture actual cost increases. Also, this year, the update better reflects rises in property insurance costs. National indices often overlooked sharp regional cost spikes, leaving some property owners at a disadvantage. 

By transitioning to audited financial data, HUD now provides a more accurate reflection of these expenses. In states with fewer than 100 sites reporting data, HUD uses regional averages. This change is particularly beneficial for multifamily properties in areas where insurance premiums have surged dramatically.