Notice of Certain Operating Cost Adjustment Factors for 2026

<NOTICE> DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT <DEPDOC>[Docket No. FR-6495-N-02]</DEPDOC> <SUBJECT>Notice of Certain Operating Cost Adjustment Factors for 2026</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Office of the Assistant Secretary for Housing—Federal Housing Commissioner, HUD. <HD SOURCE="HED">ACTION:</HD> Notice; request for comments. <SUM> <HD SOURCE="HED">SUMMARY:</HD> This notice establishes operating cost adjustment factors (OCAFs) 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 February 11, 2026. OCAFs are annual factors used to adjust Section 8 rents renewed under section 515 or section 524 of MAHRA. Additionally, OCAFs are part of an allowable method of rent adjustment for project-based voucher contracts pursuant to the provision at Section 8(o)(13)(I) of the United States Housing Act of 1937 that was implemented June 6, 2024. This notice also solicits comments on the methodology and data sources used to determine the OCAFs. </SUM> <DATES> <HD SOURCE="HED">DATES:</HD> <E T="03">Applicability date:</E> February 11, 2026. <E T="03">Comment due date:</E> Comments are requested on or before April 6, 2026. Late-filed comments will be considered to the extent practicable. </DATES> <HD SOURCE="HED">ADDRESSES:</HD> Interested persons are invited to submit comments responsive to this notice. Copies of all comments submitted are available for inspection and downloading at <E T="03">www.regulations.gov.</E> To receive consideration as public comments, comments must be submitted through one of the two methods specified below. All submissions must refer to the above docket number and title. Commenters are encouraged to identify the number of the specific question or questions to which they are responding. Responses should include the name(s) of the person(s) or organization(s) filing the comment; however, because any responses received by HUD will be publicly available, responses should not include any personally identifiable information or confidential commercial information. 1. <E T="03">Electronic Submission of Comments.</E> Interested persons may submit comments electronically through the Federal eRulemaking Portal at <E T="03">http://www.regulations.gov.</E> 2. <E T="03">Submission of Comments by Mail.</E> Comments may be submitted by mail to the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street SW, Room 10276, Washington, DC 20410-0500. HUD strongly encourages commenters to submit their feedback and recommendations electronically. Electronic submission of comments allows the commenter maximum time to prepare and submit a response, ensures timely receipt by HUD, and enables HUD to make comments immediately available to the public. Comments submitted electronically through the <E T="03">http://www.regulations.gov</E> website can be viewed by other commenters and interested members of the public. Commenters should follow the instructions provided on that site to submit comments electronically. <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Jennifer Lavorel, Director, Office of Asset Management and Portfolio Oversight Program Administration Office, Department of Housing and Urban Development, 451 7th Street SW, Washington, DC 20410; telephone number 202-402-2515 (this is not a toll-free number). HUD welcomes and is prepared to receive calls from individuals who are deaf or hard of hearing, as well as individuals with speech or communication disabilities. To learn more about how to make an accessible telephone call, please visit <E T="03">https://www.fcc.gov/consumers/guides/</E> telecommunications-relay-service-trs. </FURINF> <SUPLINF> <HD SOURCE="HED"> SUPPLEMENTARY INFORMATION: </HD> <HD SOURCE="HD1">I. Background</HD> Section 514(e)(2) and section 524(c)(1) of the Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRA) (42 U.S.C. 1437f note), as amended, require HUD to establish guidelines for the development of operating cost adjustment factors (OCAFs) for rent adjustments. Similar language is found in sections 524(a)(4)(C)(i), 524(b)(1)(A), and 524(b)(3)(A) of MAHRA, all of which prescribe the use of the OCAF in the calculation of renewal rents. MAHRA gives HUD broad discretion in setting OCAFs. For example, sections 524(a)(4)(C)(i), 524(b)(1)(A), 524(b)(3)(A), and 524(c)(1) refer simply to “an operating cost adjustment factor established by the Secretary.” HUD uses a single methodology for establishing OCAFs for each of these applications of OCAFs, although the methodology has evolved over time. The sole limitation to this grant of authority is a specific requirement in each of the foregoing provisions that application of an OCAF “shall not result in a negative adjustment.” In addition to their use under MAHRA, Section 8(o)(13)(I)(i) of the United States Housing Act of 1937 allows the use of OCAFs for project-based voucher contracts as implemented on June 6, 2024 in <E T="03">Housing Opportunity Through Modernization Act of 2016—Housing Choice Voucher (HCV) and Project-Based Voucher Implementation; Additional Streamlining Changes</E> (89 FR 38224 (May 7, 2024)). OCAFs vary among States and territories. Contract rents are adjusted by applying the OCAF for the State or territory in which the subject project is located to that portion of the rent attributable to operating expenses exclusive of debt service. The OCAFs provided in this notice are applicable to eligible projects having a contract anniversary date on or after February 11, 2026. <HD SOURCE="HD1">II. OCAF Determination</HD> OCAFs are composite factors calculated as the sum of weighted changes across nine operating cost categories: electricity, employee benefits, employee wages, fuel oil, goods/supplies/equipment, insurance, natural gas, property taxes, and water/sewer/trash. The weights used in the OCAF calculations for each of the nine cost component groupings are set using current percentages attributable to each of the nine expense categories. HUD calculates weights using three years of audited Annual Financial Statements from projects covered by OCAFs. HUD has found these expenditure percentages to be stable over time; using three years of data helps smooth short-term fluctuations. The nine cost component weights, and, thus, the OCAFs, are calculated at the State level, which is the lowest level of geographical aggregation with enough projects to permit statistical analysis. These data are not available for the Western Pacific Islands, so data for Hawaii are used as the best available indicator of OCAFs for these areas. HUD relies on current and reliable price data available for each cost category drawing primarily from federal statistical agencies and audited financial statements. State-level data for electricity, fuel oil, and natural gas from Department of Energy surveys are relatively current and continue to be used. Data on changes in employee benefits, employee wages, goods/supplies/equipment, property taxes, and water/sewer/trash costs are available only at the national level. HUD uses State and HUD Region data for insurance, continuing the practice adopted for FY 2025 OCAFs. The data sources used for the selected nine cost indicators are as follows: • <E T="03">Electricity:</E> Energy Information Agency (EIA), May 2025 “Electric Power Monthly” report, Table 5.6.B. HUD compares the January 2025 to May 2025 estimate to the January 2024 to May 2024 estimate. <E T="03">https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_06_b.</E> • <E T="03">Employee benefits:</E> Bureau of Labor Statistics (BLS) Employment Cost Index (ECI), Private Industry Benefits, All Workers (Series ID CIU2030000000000I), at the national level. HUD compares the second quarter of 2025 to the second quarter of 2024. <E T="03">https://data.bls.gov/timeseries/CIU2030000000000I.</E> • <E T="03">Employee wages:</E> BLS ECI, Private Industry Wages and Salaries, All Workers (Series ID CIU2020000000000I), at the national level. HUD compares the second quarter of 2025 to the second quarter of 2024. <E T="03">https://data.bls.gov/timeseries/CIU2020000000000I.</E> • <E T="03">Fuel Oil:</E> EIA U.S. Weekly Heating Oil and Propane Prices report. Average weekly residential heating oil prices in cents per gallon excluding taxes for the period from October 7, 2024, through the week of May 12, 2025, are compared to the average from October 2, 2023, through the week of March 25, 2024. <SU>1</SU> <FTREF/> For the States with insufficient fuel oil consumption to have separate estimates, HUD uses the relevant regional Petroleum Administration for Defense Districts (PADD) change between these two periods; if there is no regional PADD estimate, HUD uses the U.S. change between these two periods. <E T="03">https://www.eia.gov/dnav/pet/pet_pri_wfr_a_EPD2F_PRS_dpgal_w.htm.</E> <FTNT> <SU>1</SU>  Data for April and May were available at the time the OCAFs were calculated this year but not in the prior year. Given that there is a minimal difference (approximately -0.016 at most for any given state) with oil generally contributing less than 1 percent to state OCAFs, the additional data has been used. When available, additional data will be used in future calculations as well. </FTNT> • <E T="03">Goods/Supplies/Equipment:</E> BLS Consumer Price Index, All Items Less Food, Energy and Shelter (Series ID CUUR0000SA0L12E) at the national level. HUD compares the July 2025 estimate to the estimate for July 2024. <E T="03">https://data.bls.gov/timeseries/CUUR0000SA0L12E.</E> • ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 20k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━