Property contract rents are adjusted annually. The Owner/Agent may choose to utilize an Operating Cost Adjustment Factor (OCAF), which is a non-specific adjustment factor calculated and published annually by HUD, or a Budget-Based Rent Adjustment, which is based on property-specific projected operating costs. Once the complete package is received from the Owner/Agent, it is reviewed and rental adjustments are processed.
Dependent upon both the section of the law and the specific terms of the HAP contract, the property may be eligible for one of the following rent adjustment methods:
Approximately 150 days prior to the contract anniversary date, properties eligible for an Auto OCAF rent adjustment receive a packet via email that includes a letter indicating the new OCAF increased rents, a new Exhibit A, and an owner certification for the accuracy of the property’s annual mortgage payment (Principle, Interest, Mortgage Insurance Payment (MIP) and non-Section 8 unit rent potential). Owners and Managing Agents should read the Auto OCAF Acceptance Letter carefully to confirm that the debt service and current non-Section 8 rents are correct before signing the letter.
Rent Comparability Study (RCS)
Certain contract types require submission of an RCS and are not eligible for an Auto OCAF. This will be identified in the property’s contract.
Budget Based (BB)
The budget-based rent adjustment requirements can be found in Chapter 7 of the handbook HUD 4350.1. All required forms and supporting documentation for changes must be submitted with the owner's written request.
All owners of properties that have a utility allowance must adhere to the Methodology for Completing a Multifamily Housing Utility Analysis (HUD 2015-4) issued on June 22, 2015.
Contract renewals and rent adjustment requests for properties with utilities paid by the residents must be accompanied by a utility allowance study. A new utility study is requested every third year for each bedroom size, which is determined by using a baseline utility analysis. For the two years after the baseline is established, utility allowance amounts for each bedroom size at the property will be adjusted by a state-specific Utility Allowance Factor (UAF) provided by HUD (in lieu of another baseline utility analysis). For properties with more than one utility type paid by the residents, an analysis must be submitted for each utility type (i.e. electric and gas).
When the utility analysis documentation supports a decrease to the utility allowance(s), the owner must adhere to the posting requirements set forth in Notice 24 CFR 245.410.