It took longer than usual this year, but HUD finally published the Operating Cost Adjustment Factors (OCAFs) for Fiscal Year 2026. Published on Feb. 2, the new OCAFs apply to Housing Assistance Payment (HAP) contracts with anniversary dates of Feb. 11, 2026, or later. Here’s a quick briefing of what you need to know about OCAFs and the new rates to plan your project-based housing budget and contract renewals for the upcoming year. 

What OCAFs Are

[Note: You can skip this section if you already know what OCAFs are all about.] HUD uses OCAFs to set annual rent rates for project-based contracts issued under Section 8 of the U.S. Housing Act of 1937 and renewed under Sections 515 or 524 of the Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRA). OCAFs are supposed to align rents with local market conditions based on weighted changes to nine operating expense categories: electricity, employee benefits, employee wages, fuel oil, goods/supplies/equipment, insurance, natural gas, property taxes, and water/sewer/trash.

The sum of these nine cost component percentage weights equals 100% of operating costs for purposes of OCAF calculations. 

To calculate state-specific OCAFs, HUD multiplies state-level cost component weights developed from audited financial statement data by selected inflation factors. Example: If wages in Virginia represent 50% of total operating cost expenses and increase by 4% from 2024 to 2025, the wage increase component of the Virginia OCAF for 2025 would be 2.0% (50% of 4%). HUD would then add 2.0% to the increases for the other eight expense categories to calculate Virginia’s 2026 OCAF.

The 2026 OCAFs Delay & Potential Impact on Owners

The OCAF system has proven generally effective. HUD has also improved the formula in recent years. But it’s far from perfect. And when there is a disconnect between the OCAF-based rent adjustment and actual operating cost trends in a local market, owners may struggle to pay their bills and maintain cash flow. 

The good news is that HUD recognizes this and allows for corrections. In a typical year, HUD publishes the proposed OCAFs for the upcoming fiscal year in October or November for 60 days of comments. This gives owners, managers, and other stakeholders time to provide, and HUD to make, adjustments in response to public feedback before the new rates take effect. 

The bad news is that this didn’t happen this year. Still scrambling to catch up after the 37-day government shutdown, HUD proposed the 2026 OCAFs only nine days before their scheduled Feb. 11 effective date. Although the usual 60-day comment period is still taking place, the proposal clearly states that “HUD will not revise the FY26 OCAFs in response to public comments but will take public input into consideration when developing the FY27 OCAFs.”

The 2026 OCAFs

Cross your fingers that HUD got things right. HUD set the national average OCAF for 2026 at 5.1%, a slight increase from last year’s average of 4.8%. This is hardly surprising given that operating costs like labor, utilities, insurance, and maintenance are rising across the country. Here are the national average OCAF rent increases from the past six years, starting with the pandemic year of 2020: 

• 2020: 2.2%;
• 2021: 2.5%;
• 2022: 3.1%;
• 2023: 6.1%;
• 2024: 5.3%;
• 2025: 4.8%;
• 2026: 5.1%.

As usual, there were significant variations in state-specific rates, ranging from the low of 3.3% for Maine to the high of 9.8% for Louisiana (and 12.3% for the Virgin Islands). Our table below shows the 2026 OCAFs for each state. 

Key HUD Inflationary Adjustments for 2026

In addition to OCAF increases, your 2026 income and costs will be directly affected by the inflation adjustments that took effect on Jan. 1. Those adjustments include:

• Passbook Savings Rate: Reduced from 0.45% to 0.40%;
• Asset Limitation: Threshold for families to be ineligible due to high net assets increased to $105,574;
• Imputed Asset Income: Threshold for calculating imputed income from assets increased to $52,787;
• Non-Necessary Personal Property: Threshold for including the total value of non-necessary personal property in net family assets is also $52,787;
• Self-Certification of Assets: Threshold for self-certification of assets increased to $52,787; 
• Mandatory Deduction for Elderly and Disabled Families: Threshold increased from $525 to $550; and
• Mandatory Deduction for a Dependent: Threshold increased from $480 to $500. 

2026 Operating Cost Adjustment Factors by State