HUD to PHAs: Prepare for Funding Shortfalls & Cut Operating Costs

That’s the somber message HUD sent to the nation’s roughly 3,300 PHAs in a Nov. 17, 2025, notice entitled “Cost-Savings Measures in the Housing Choice Voucher and Project Based Voucher Programs” (PIH 2025-28). The notice (which we’ll refer to as “PIH 28”) outlines the cost-cutting measures that PHAs may take to reduce housing assistance payment (HAP) expenses and prevent funding shortfalls. Among the options: cutting vouchers, raising minimum rent, turning away families seeking to move, and, as a last resort, terminating the HAP contracts of families with housing vouchers. Here’s a briefing of what landlords and their managers need to know about PIH 28.

The 3 Cost-Cutting Categories

PIH 28 is a set of recommendations, not mandates. PHAs have the discretion to make their own decisions about what costs to cut. But HUD “strongly recommends” that PHAs avoid actions that adversely impact families, such as raising rents. PIH 28 lays out a menu of cost-cutting options grouped into three categories:

Category 1. Standard compliance & program management practices. Category 1 lists potential cost-saving measures involving mandatory program requirements “that, if used proactively,” may help PHAs save money:

• Ensure that the payment standard used to calculate the family share is based on the lower of the voucher size for which the family is eligible or the actual size of the unit—for example, a single-member household living in a three-bedroom unit must have a zero- or one-bedroom, rather than a three-bedroom payment standard;
• Regularly monitor local market trends and keep payment standard amounts and schedule within the basic range of 90 to 110 percent of the applicable fair market rents (FMR);
• Review utility allowances more frequently than the required once a year to determine if they’re higher than the typical cost;
• Ensure that the utility allowance used to calculate the housing assistance payment for a tenant-based Housing Choice Voucher (HCV) is appropriate for the size of the unit the family leases; 
• Use an area-wide, energy-efficient utility allowance schedule for building units that meets Leadership in Energy and Environmental Design (LEED) or ENERGY STAR standards; 
• Base utility allowance payments on actual flat fees charged by an owner for utilities that are billed directly, provided that the flat fee doesn’t exceed the PHA’s utility allowance for the utilities the fee covers;
• Determine whether the rent to owner is reasonable compared to other comparable unassisted units and that it’s in accordance with the HAP contract;
• If experiencing a shortfall, don’t initiate new requests for proposals (RFPs) or undertake new selection processes, except for new Project Based Voucher (PBV) Rental Assistance Demonstration (RAD) developments; 
• Cancel current RFPs or selection processes that haven’t yet come to fruition if you lack the budget authority available to pay the HAP for PBV contract units; and/or
• Comply with all applicable regulations and requirements in determining PBV rents to owners including the ban on exceeding the rent requested by the owner and on exceeding the reasonable rent.

Category 2. Additional cost-cutting actions. The controversial parts of PIH 28 are the additional cost-cutting measures that HUD recommends PHAs consider, starting with the Category 2 actions that can be taken without HUD approval: 

• Reduce or stop issuing turnover vouchers to new applicants;
•  Increase the minimum rent up to $50 (or higher for Moving to Work (MTW) PHAs with an approved MTW waiver for a higher minimum rent increase);
• Stop absorbing new portable families who want to move and elect to bill the initial PHA as a cost-savings measure; and/or
• Revise subsidy standards that exceed minimum HUD requirements to reduce voucher size eligibility, subject to the requirement that HCV or PBV units have at least one bedroom or living/sleeping room per two people.

Category 3. Other cost-saving measures that HUD must approve. Category 3 lists cost-cutting measures that, unlike Category 2, require HUD approval:  

• Under some circumstances, PHAs without sufficient funding may deny requests from families receiving tenant-based assistance who want to move to another location; 
• Rescind vouchers issued to applicants that haven’t yet resulted in an executed HAP contract (although HUD says that the PHA should work with HUD’s shortfall prevention team (SPT) and local HUD field office to minimize the detrimental impact on affected families); 
• Seek a waiver to apply decreases in payment standards provided for in the HAP contract immediately to current families, provided that the waiver request includes the calculation the PHA used to arrive at the projected shortfall in funding and cost-savings measures it’s taken or will take as part of the required good cause justification; and/or
• Request approval to establish payment standards below 90 percent of the applicable FMR, which will be granted only if the family share for more than 40 percent of the PHA’s voucher participants doesn’t exceed 30 percent of monthly adjusted incomes (unless the approval is required to prevent termination of program participants).

The Nuclear Option: Termination of Assistance

Of course, there’s no guarantee that cutting new vouchers, rescinding previously issued vouchers, increasing minimum rent, turning away families who want to move, and initiating the other cost-cutting options PIH 28 lays out will enable the PHA to get its funding shortfall under control. 

HUD reminds PHAs that, “as a last resort,” they may terminate HAP contracts for families with tenant-based HCVs if they determine that funding under the Consolidated Annual Contributions Contract (CACC) is “insufficient to support continued assistance for families in the program.” Of course, PHAs must follow the applicable requirements for termination of the HAP contract based on insufficient funding. But it’s comforting to know that HUD is reminding PHAs that the nuclear option is there in case they need it. 

The Reasonable Accommodations Factor

PIH 28 also addresses another fly in the ointment that PHAs that initiate the recommended cost-cutting measures may encounter, namely, the rights of disabled individuals affected by these actions to “reasonable accommodations” under the Fair Housing Act, Americans with Disabilities Act, and other federal laws. PIH 28 reminds PHAs that they don’t have to grant accommodations that would impose undue financial and administrative burdens. When denying a reasonable accommodations request, PHAs should engage the family in discussions to explore alternative accommodations that would effectively address the family’s disability-related needs.