On November 22, 2019, the Department of Housing & Urban Development (HUD) published the Operating Cost Adjustment Factors (OCAF) for 2020. These factors apply to project-based assistance contracts issued under Section 8 of the Housing Act of 1937 (the “Section 8” program) and will be available to projects having an anniversary date on or after February 11, 2020.
Contract rents are adjusted by applying the OCAF to the portion of the rent attributable to operating expenses exclusive of debt service.
OCAFs are calculated as the sum of weighted component cost changes for wages, employee benefits, property taxes, insurance, supplies and equipment, fuel oil, electricity, natural gas, and water/sewer/trash using publicly available indices. Average expense proportions were calculated using three years of Audited Annual Financial Statements from projects covered by OCAFs. The nine cost component weights were calculated at the state level, which is the lowest level of geographical aggregation with enough projects to permit statistical analysis. This type of data was not available for the Western Pacific Territories, so the data for Hawaii was used as the best available indicator for these areas.
The national average OCAF is 2.2%. The lowest increases are found in Missouri and Oklahoma, both with an OCAF of 1.8%. The highest OCAFs are in Hawaii and the Western Pacific Islands at 3.4% with Massachusetts and Rhode Island having the highest in the contiguous 48 states at 3.3%.
The list for all the states was published in the November 22, 2019 Federal Register and owners subject to OCAF should obtain a copy of that document.