A proposed change in how operating costs are calculated for affordable housing communities is projected to double the annual budget rate increase for those providers in 2023.
Reacting to “historically high” inflation, the Department of Housing and Urban Development published a notice in the Federal Register proposing changes to the calculation of the annual Operating Cost Adjustment Factors for 2023. OCAFs are used to adjust project-based Section 8 rents annually, including those in the Section 202 Supportive Housing for the Elderly Program.
If enacted, the adjustments could double the annual budget rate increase from 2022 rates, according to LeadingAge.
To account for high inflationary levels, the 2023 proposed calculation would look at cost calculations for a time period that exceeds one year. The use of that longer data period, however, is for 2023 calculations only and will revert back to year-over year data for 2024.
To calculate the inflation factor for the insurance component, the HUD proposal includes switching from using consumer data, like the Consumer Price Index, to industry data, like the Producer Price Index, to better reflect the cost of property insurance.
The proposal also includes a modification to the calculation method beginning in 2024 to use more time-relevant data in the future. Beginning in 2024, HUD proposed pulling data in August of each year rather than in May to calculate OCAFs for the following year. The move is meant to reduce the time lag between when OCAFs are calculated and when they go into effect.
LeadingAge Director of Housing Operations and Policy Juliana Bilowich wrote in a blog post that the association advocated for changes to HUD’s budget-setting approach, and is hopeful that the proposal will “benefit affordable senior housing providers struggling with relatively flat operating budget increase in a time of historic cost increases.”
HUD is accepting comments on the proposed changes through Dec. 15. The changes could go into effect Feb. 11, affecting the budget calculations for eligible multifamily housing projects.
