HUD Issues 2024 Operating Cost Adjustment Factors
The national average increase of the new OCAFs is 5.3 percent.
HUD recently announced the 2024 Operating Cost Adjustment Factors (OCAFs). These figures are used to adjust Section 8 rents under the Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRA). These annual factors reflect the fluctuating costs of running a Multifamily Housing site, applied to rents on their anniversary dates. The recently published OCAFs provided are applicable to eligible projects having a contract anniversary date on or after Feb. 11, 2024.
Recent OCAF National Average Increases
The national average increase of the new OCAFs comes in at 5.3 percent. Although the 2024 increase isn’t as much as it was in 2023, it’s significantly higher than what was considered a normal increase before the pandemic. Here are the national average OCAF increases from the past five years.
- 2019: 2.9 percent
- 2020: 2.2 percent
- 2021: 2.5 percent
- 2022: 3.1 percent
- 2023: 6.1 percent
How OCAFS Are Determined
OCAFs are determined using nine cost components—electricity, fuel oil, natural gas, employee benefits, employee wages, goods/supplies/equipment, insurance, property tax, and water/sewer/trash—and generally look at year-over-year changes in each of the cost components with data being pulled in May of each year.
HUD uses the best current price data sources for the nine cost categories in calculating annual change factors. State-level data for electricity, fuel oil, and natural gas from Department of Energy surveys are used, and data on changes in employee benefits/employee wages, goods/supplies/equipment, insurance, property taxes, and water/sewer/trash costs are available only at the national level. Here are the data sources used for the nine cost indicators used in formulating the OCAFs:
- Electricity: Energy Information Agency (EIA), May 2023 “Electric Power Monthly” report.
- Employee Benefits/Employee Wages: Bureau of Labor Statistics, Private Industry Benefits and Private Industry Wages and Salaries.
- Fuel Oil: U.S. Weekly Heating Oil and Propane Prices report. For states with insufficient fuel oil consumption to have separate estimates, the relevant regional Petroleum Administration for Defense Districts (PADD) change between these two periods is used.
- Goods/Supplies/Equipment: Bureau of Labor Statistics Consumer Price Index, All Items Less Food, Energy and Shelter at the national level.
- Insurance: Bureau of Labor Statistics Producer Price Index, Industry Data for Direct Property and Casualty Insurers: Commercial Multiple Peril Insurance.
- Natural Gas: Energy Information Agency, Natural Gas, Residential Energy Price, June 2022–May 2023 monthly prices in dollars per 1,000 cubic feet at the state level.
- Property Taxes: Census Quarterly Summary of State and Local Government Tax Revenue
- Water/Sewer/Trash: Consumer Price Index, All Urban Consumers, Water and Sewer and Trash Collection Services.
Auto OCAF
Some contracts are eligible for an Auto OCAF. The Auto OCAF Rent Increase process eliminates the requirement for the owner to calculate its own OCAF rent increase and submit an OCAF Worksheet and a cover letter to the contract administrator during Amend Rents years to obtain an OCAF rent increase. Contract renewals and certain contracts that aren’t eligible to receive an automatic OCAF annually won’t be a part of this automated process.
If your site is eligible for an Auto OCAF rent increase, you should receive a rent adjustment reminder letter approximately 180 days prior to the contract anniversary date. If you intend to choose the OCAF rent adjustment, you should be processing the utility analysis (if applicable) and/or rent comparability study (if applicable). Then, approximately 150 days before the contract anniversary date, the contract administrator will send a letter advising you of your site’s new OCAF increased rents, a new revised rent schedule (Exhibit A), and a request that you certify the accuracy of the debt service and non-Section 8 rent potential amounts used.
Once you’ve accepted the Auto OCAF rent increase, you’ll need to execute one Form HUD-92458 Rent Schedule and return it to the contract administrator with your signed certification within 10 days. If your contract allows for budget-based rent adjustments, you’ll be offered the option to submit a budget-based request instead of returning the Auto OCAF to the contract administrator.
Once you receive the executed HUD-92458 Rent Schedules, you can complete your Gross Rent Change through TRACS. The entire process should be easily completed in time to implement the new rents by your site’s contract anniversary date.
Sites Not Eligible for Auto OCAF
For a site not eligible for the Auto OCAF, it’s up to you to make sure you get your annual rent increase and keep your assistance payments coming on time. To do this, you must submit an OCAF rent adjustment worksheet to HUD or your contract administrator at least 120 days before the anniversary of the renewal date on your contract. If you don’t do this a full 120 days before the anniversary date, you won’t get the rent increase on time.
Sites that aren’t eligible for Auto OCAF must submit the OCAF Rent Adjustment Worksheet (HUD Form 9625), utility allowance analysis (if applicable), and a mortgage statement showing current debt service to obtain an annual rent increase.
Some sites have multi-year renewal contracts that let them choose to get budget-based rent increases instead of OCAF rent increases. If your contract gives you the option of getting budget-based rent increases, and you decide to choose that type of increase instead of an OCAF rent increase, follow the procedures spelled out in Section 2-15 of the Section 8 Renewal Guide.
State-by-State Operating Cost Adjustment Factors for 2024
The following table provides the Operating Cost Adjustment Factors (OCAFs) for 2024. The OCAFs can be applied to eligible Section 8 projects with a contract anniversary date on or after Feb. 11, 2024. The data shows the variable nature of operating costs across the United States and is crucial for effective fiscal planning in the affordable housing sector.
State OCAF 2023 (%) OCAF 2024 (%) Percent Change
Alabama 5.8 5.1 -12.1
Alaska 6 4.9 -18.3
Arizona 5.7 4.7 -17.5
Arkansas 5.9 5.3 -10.2
California 7.1 5.4 -23.9
Colorado 5.9 5.2 -11.9
Connecticut 6.1 7.1 16.4
Delaware 5.8 5.3 -8.6
D.C. 5.8 5.4 -6.9
Florida 6.1 5.2 -14.8
Georgia 5.6 4.8 -14.3
Hawaii 7.3 5.4 -26.0
Idaho 5.1 4.8 -5.9
Illinois 7.3 5.6 -23.3
Indiana 6.4 5 -21.9
Iowa 5 4.5 -10.0
Kansas 5.5 5.1 -7.3
Kentucky 6.4 4.8 -25.0
Louisiana 5.9 5 -15.3
Maine 8.3 8 -3.6
Maryland 6.6 5.4 -18.2
Massachusetts 6.1 6.6 8.2
Michigan 5.5 5.2 -5.5
Minnesota 7.3 5.3 -27.4
Mississippi 6.2 5.3 -14.5
Missouri 5.2 5.2 0.0
Montana 5.4 5.3 -1.9
Nebraska 5.9 4.9 -16.9
Nevada 6.2 5.4 -12.9
New Hampshire 5.7 7 22.8
New Jersey 5.3 5.6 5.7
New Mexico 6 4.9 -18.3
New York 7.6 5.4 -28.9
North Carolina 5.7 4.9 -14.0
North Dakota 6 4.7 -21.7
Ohio 6.2 5.6 -9.7
Oklahoma 4.9 5.2 6.1
Oregon 5.6 4.9 -12.5
Pacific Islands 7.3 5.4 -26.0
Pennsylvania 5.8 6.1 5.2
Puerto Rico 6.3 5 -20.6
Rhode Island 5.3 6.4 20.8
South Carolina 5.6 4.8 -14.3
South Dakota 4.8 4.3 -10.4
Tennessee 5.7 4.9 -14.0
Texas 5.7 5.3 -7.0
Utah 5.6 4.8 -14.3
Vermont 6 5.2 -13.3
Virgin Islands 5.8 5.7 -1.7
Virginia 6 5.2 -13.3
Washington 5.9 4.9 -16.9
West Virginia 6.6 5.3 -19.7
Wisconsin 6.6 5.1 -22.7
Wyoming 5.6 4.9 -12.5