HUD Publishes Operating Cost Adjustment Factors (OCAF) for 2021

On November 27, 2020, HUD published in the Federal Register a Notice of Certain Operating Cost Adjustment Factors for 2021. These OCAFs may be used for eligible project-based assistance properties that have an anniversary date on or after February 11, 2021. OCAFs are annual factors used to adjust Section 8 rents for most Section 8 projects.

HUD has used a single methodology for establishing OCAFs. These OCAFs vary among states and territories.

Contract rents are adjusted by applying the OCAF to that 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.

To calculate the OCAFs, state-level cost component weights developed from state-wide data are multiplied by the selected inflation factors. For instance, if wages in Virginia comprised 50% of total operating cost expenses and increased by 4% from 2019 to 2020, the wage increase component of the Virginia OCAF for 2021 would be 2% (50% times 4%). This 2% would then be added to the increases for the other eight expense categories to calculate the 2021 OCAF for Virginia. For states where the calculated OCAF is less than zero, the OCAF is floored at zero.

Examples of the 2021 OCAFs:

  • New Jersey, Texas, and Wisconsin have the highest OCAFs, at 2.8%.
  • Vermont has the lowest OCAF at 1.8%.
  • The mean OCAF is 2.4% and the median is 2.5%.

Owners of affected properties should review the November 27 notice for the OCAF applicable to their state or territory.