Notice2025-22375
Section 8 Housing Assistance Payments Program-Annual Adjustment Factors, Fiscal Year 2026
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
December 9, 2025
Effective
December 9, 2025
Issuing agencies
Housing and Urban Development Department
Abstract
Certain assistance contracts signed by owners participating in the Department's Section 8 housing assistance payment programs must provide annual adjustments to monthly rentals for units covered by the contracts. For owners subject to a Reserve for Replacement deposit requirement, HUD also requires that the amount of the required deposit be adjusted each year by the AAF. This notice announces FY 2026 AAFs for adjustment of contract rents on the anniversary of those assistance contracts. The factors are based on a formula using residential rent and utility cost changes from the most recent annual Bureau of Labor Statistics Consumer Price Index (CPI) survey and market rents from a total of six possible private sector rent data sources. AAFs continue to be based on the shelter and gross rent inflation factors methodology used in HUD's Fair Market Rent calculation that was adopted in FY 2024.
Full Text
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<title>Federal Register, Volume 90 Issue 234 (Tuesday, December 9, 2025)</title>
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[Federal Register Volume 90, Number 234 (Tuesday, December 9, 2025)]
[Notices]
[Pages 57091-57093]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-22375]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
[Docket No. FR-6558-N-01]
Section 8 Housing Assistance Payments Program--Annual Adjustment
Factors, Fiscal Year 2026
AGENCY: Office of the Assistant Secretary for Policy Development and
Research, Department of Housing and Urban Development, HUD.
ACTION: Notice of fiscal year (FY) 2026 Annual Adjustment Factors
(AAFs).
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SUMMARY: Certain assistance contracts signed by owners participating in
the Department's Section 8 housing assistance payment programs must
provide annual adjustments to monthly rentals for units covered by the
contracts. For owners subject to a Reserve for Replacement deposit
requirement, HUD also requires that the amount of the required deposit
be adjusted each year by the AAF. This notice announces FY 2026 AAFs
for adjustment of contract rents on the anniversary of those assistance
contracts. The factors are based on a formula using residential rent
and utility cost changes from the most recent annual Bureau of Labor
Statistics Consumer Price Index (CPI) survey and market rents from a
total of six possible private sector rent data sources. AAFs continue
to be based on the shelter and gross rent inflation factors methodology
used in HUD's Fair Market Rent calculation that was adopted in FY 2024.
DATES: The FY 2026 AAFs are effective December 9, 2025.
FOR FURTHER INFORMATION CONTACT: For questions regarding the Moderate
Rehabilitation programs (not the Single Room Occupancy program),
contact Ryan Jones, Director, Management and Operations Division,
Office of Housing Voucher Programs, Office of Public and Indian
Housing, 202-708-1380. For questions regarding the Single Room
Occupancy (SRO) Moderate Rehabilitation program, contact Norman A.
Suchar, Director, Office of Special Needs Assistance Programs, Office
of Community Planning and Development, 202-402-5015. For questions
relating to all other Section 8 programs, contact Jennifer Larson,
Director, Office of Asset Management, Office of Multifamily Housing,
202-402-7769. For technical information regarding the development of
the schedules for specific areas or the methods used for calculating
AAFs, contact Adam Bibler, Director, Program Parameters and Research
Division, Office of Policy Development and Research, 202-402-6057. The
mailing address for these individuals is: Department of Housing and
Urban Development, 451 7th Street SW, Washington, DC 20410. HUD
welcomes and is prepared to receive calls from individuals who are deaf
or hard of hearing, as well as individuals with speech or communication
disabilities. To learn more about how to make an accessible telephone
call, please visit <a href="https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs">https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs</a>.
SUPPLEMENTARY INFORMATION: The United States Housing Act of 1937 (``the
1937 Act'') requires that certain assistance contracts signed by owners
participating in the Department's Section 8 housing assistance payment
programs provide annual adjustments to monthly rentals for units
covered by the contracts. HUD establishes the rent adjustment factors
(AAFs) on the basis of CPI and other private rent data relating to
changes in residential rent and utility costs. The AAFs are applied at
the anniversary of Housing Assistance Payment (HAP) contracts for which
rents are to be adjusted using the AAF for those calendar months
commencing after the effective date of this notice. The amount that an
owner is required to deposit to the Reserve for Replacement account is
also adjusted annually by the most recently published AAF at the HAP
contract anniversary. AAFs are distinct from, and do not apply to the
same properties as, Operating Cost Adjustment Factors (OCAFs). OCAFs
are annual factors used to adjust rents for project-based rental
assistance contracts issued under Section 8 of the 1937 Act and renewed
under section 515 or section 524 of the Multifamily Assisted Housing
Reform and Affordability Act of 1997 (MAHRA). In addition to their use
under MAHRA, section 8(o)(13)(I)(i) of the 1937 Act allows the use of
OCAFs for project-based voucher contracts as implemented on June 6,
2024 in Housing Opportunity Through Modernization Act of 2016--Housing
Choice Voucher (HCV) and Project-Based Voucher Implementation;
Additional Streamlining Changes (89 FR 38224 (May 7, 2024)). HUD has
published OCAFs for 2025 in the Federal Register at 89 FR 99893. The
AAFs are also distinct from Renewal Funding Inflation Factors, which
help determine renewal funding for public housing agencies operating
the Housing Choice Voucher program. A separate Federal Register notice,
to be published following the passage of FY 2026 HUD appropriations,
will contain the 2026 Renewal Funding Inflation Factors.
Tables showing AAFs will be available electronically from the HUD
data information page at <a href="http://www.huduser.gov/portal/datasets/aaf.html">http://www.huduser.gov/portal/datasets/aaf.html</a>.
I. Applying AAFs to Various Section 8 Programs
The AAFs established by this notice are used to adjust contract
rents for units assisted in certain Section 8 housing assistance
payment programs during the initial (i.e., pre-renewal) term of the HAP
contract. There are two categories of Section 8 programs that use the
AAFs:
[[Page 57092]]
Category 1: The Section 8 New Construction, Substantial
Rehabilitation, and Moderate Rehabilitation programs; and
Category 2: The Section 8 Loan Management Set-Aside (LMSA) and
Property Disposition (PD) programs.
Each Section 8 program category uses the AAFs differently. The
specific application of the AAFs is determined by the law, the HAP
contract, and appropriate program regulations or requirements. Later
sections of this notice describe how AAFs are used for the respective
program.
AAFs are not used in the following cases:
Renewal Rents. AAFs are not used to determine renewal rents after
expiration of the original Section 8 HAP contract. In general, renewal
rents are established in accordance with the statutory provision in
MAHRA, as amended, under which the HAP is renewed. After renewal,
annual rent adjustments will be provided in accordance with MAHRA.
Budget-Based Rents. AAFs are not used for budget-based rent
adjustments. For projects receiving Section 8 subsidies under the LMSA
program (24 CFR part 886, subpart A) and for projects receiving Section
8 subsidies under the PD program (24 CFR part 886, subpart C), contract
rents are adjusted, at HUD's option, either by applying the AAFs or by
budget-based adjustments in accordance with 24 CFR 886.112(b) and 24
CFR 886.312(b). Budget-based adjustments are used for most Section 8/
202 projects.
Housing Choice Voucher Program. AAFs are not used to adjust rents
in the Tenant-Based or the Project-Based Voucher programs.
Reserve for Replacement. The amount that an owner is required to
deposit to the Reserve for Replacement account is adjusted annually by
the AAF at the HAP contract anniversary.
II. Adjustment Procedures
This section of the notice provides a broad description of
procedures for adjusting the contract rent. Technical details and
requirements are described in HUD Notices H 2002-10 (Section 8 New
Construction and Substantial Rehabilitation, Loan Management, and
Property Disposition) and PIH 97-57 (Moderate Rehabilitation). HUD
publishes two separate AAF Tables, Table 1 and Table 2. AAF Table 1 and
Table 2 are posted on the HUD User website at <a href="http://www.huduser.gov/portal/datasets/aaf.html">http://www.huduser.gov/portal/datasets/aaf.html</a>. The difference between Table 1 and Table 2 is
that each AAF in Table 2 is 0.01 less than the corresponding AAF in
Table 1. Where an AAF in Table 1 would otherwise be less than 1.0, it
is set at 1.0, as required by statute; the corresponding AAF in Table 2
will also be set at 1.0, as required by statute. Because of statutory
and structural distinctions among the various Section 8 programs, there
are separate rent adjustment procedures for the three program
categories:
Category 1: Section 8 New Construction, Substantial Rehabilitation, and
Moderate Rehabilitation Programs
In the Section 8 New Construction and Substantial Rehabilitation
programs, the published AAF is applied to the pre-adjustment contract
rent. In the Section 8 Moderate Rehabilitation program (both the
regular program and the Single Room Occupancy program), the published
AAF is applied to the pre-adjustment base rent.
For Category 1 programs, the Table 1 AAF is applied before
determining comparability (rent reasonableness). Comparability applies
if the pre-adjustment gross rent (pre-adjustment contract rent plus any
allowance for tenant-paid utilities) is above the published Fair Market
Rent (FMR).
If the comparable rent level (plus any initial difference) is lower
than the contract rent as adjusted by application of the Table 1 AAF,
the comparable rent level (plus any initial difference) will be the new
contract rent. However, the pre-adjustment contract rent will not be
decreased by application of comparability.
In all other cases (i.e., unless the contract rent is reduced by
comparability):
<bullet> Table 1 AAF is used for a unit occupied by a new family
since the last annual contract anniversary.
<bullet> Table 2 AAF is used for a unit occupied by the same family
as at the time of the last annual contract anniversary.
Category 2: Section 8 Loan Management Program (24 CFR Part 886, Subpart
A) and Property Disposition Program (24 CFR Part 886, Subpart C)
Category 2 programs are not currently subject to comparability.
Comparability will again apply if HUD establishes regulations for
conducting comparability studies under 42 U.S.C. 1437f(c)(2)(C).
The applicable AAF is determined as follows:
<bullet> Table 1 AAF is used for a unit occupied by a new family
since the last annual contract anniversary.
<bullet> Table 2 AAF is used for a unit occupied by the same family
as at the time of the last annual contract anniversary.
Category 3: Reserve for Replacement
The amount of the deposit to the Reserve for Replacement account
must be increased annually using the most recently published ``AAF with
Highest Utility Excluded'' for the Metropolitan/Region in which the
project is located. The procedure for identifying the correct
Metropolitan/Region is described in Section IV below; the local area
factor displayed in the AAF Metro Lookup Tool, found at <a href="https://www.huduser.gov/portal/datasets/aaf.html">https://www.huduser.gov/portal/datasets/aaf.html</a>, must be used. This adjustment
must be made without regard to vacancies.
III. When To Use Reduced AAFs (From AAF Table 2)
In accordance with Section 8(c)(2)(A) of the United States Housing
Act of 1937 (42 U.S.C. 1437f(c)(2)(A)), the AAF is reduced by 0.01:
In Section 8 programs, for a unit occupied by the same family at
the time of the last annual rent adjustment (and where the rent is not
reduced by application of comparability (rent reasonableness)).
The law provides that:
[F]or any unit occupied by the same family at the time of the
last annual rental adjustment, where the assistance contract
provides for the adjustment of the maximum monthly rent by applying
an annual adjustment factor and where the rent for a unit is
otherwise eligible for an adjustment based on the full amount of the
factor . . . 0.01 shall be subtracted from the amount of the annual
adjustment factor (except that the factor shall not be reduced to
less than 1.0), and the adjusted rent shall not exceed the rent for
a comparable unassisted unit of similar quality, type and age in the
market area. 42 U.S.C. 1437f(c)(2)(A).
Legislative history for this statutory provision states that ``the
rationale [for lower AAFs for non-turnover units is] that operating
costs are less if tenant turnover is less . . .'' (see Department of
Veteran Affairs and Housing and Urban Development, and Independent
Agencies Appropriations for 1995, Hearings Before a Subcommittee of the
Committee on Appropriations 103d Cong., 2d Sess. 591 (1994)). The
Congressional Record also states the following:
Because the cost to owners of turnover-related vacancies,
maintenance, and marketing are lower for long-term stable tenants,
these tenants are typically charged less than recent movers in the
unassisted market. Since HUD pays the full amount of any rent
increases for assisted tenants in section 8 projects . . . HUD
should expect to benefit from this `tenure discount.' Turnover is
lower in assisted properties than in the unassisted market, so the
effect of the current inconsistency with market-based rent
[[Page 57093]]
increases is exacerbated. (140 Cong. Rec. 8659, 8693 (1994)).
IV. How To Find the AAF
As stated, AAF Table 1 and Table 2 are posted on the HUD User
website at <a href="http://www.huduser.gov/portal/datasets/aaf.html">http://www.huduser.gov/portal/datasets/aaf.html</a>. Both tables
provide the Regional and Metropolitan Component Areas to be used in
selecting a project's geographic area for the AAF. For projects located
in non-metropolitan areas, select the Query Tool, AAF Documentation,
State, then county to determine which Metropolitan Component Area to
use when selecting the AAF for the project.
There are two numeric columns in each AAF table. The first column
is used to adjust contract rent for rental units where the highest cost
utility is included in the contract rent, i.e., where the owner pays
for the highest cost utility. The second column is used where the
highest cost utility is not included in the contract rent, i.e., where
the tenant pays for the highest cost utility.
The applicable AAF is selected as follows:
<bullet> Determine whether Table 1 or Table 2 is applicable. In
Table 1 or Table 2, locate the AAF for the geographic area where the
contract unit is located.
<bullet> Determine whether the highest cost utility is or is not
included in contract rent for the contract unit.
<bullet> If highest cost utility is included, select the AAF from
the column for ``Highest Cost Utility Included.'' If highest cost
utility is not included, select the AAF from the column for ``Highest
Cost Utility Excluded.''
V. Methodology
AAFs are rent inflation factors. Two types of rent inflation
factors are calculated for AAFs: gross rent factors and shelter rent
factors. The gross rent factor accounts for inflation in the cost of
both the rent of the residence and the utilities used by the unit; the
shelter rent factor accounts for the inflation in the rent of the
residence but does not reflect any change in the cost of utilities. The
gross rent inflation factor is designated as ``Highest Cost Utility
Included'' and the shelter rent inflation factor is designated as
``Highest Cost Utility Excluded.'' HUD calculates the AAFs based on the
shelter and gross rent inflation factors used in FMR calculations. The
source data for AAFs therefore come from the 23 local and 4 regional
CPI components (rent of primary residence and household fuels and
utilities), depending on the location of the AAF area, and are combined
with available measures of private data sources in calculating a
weighted average shelter and gross rent inflation factor. The private
measures of rent used by HUD are the RealPage average effective rent
per unit, Moody's Analytics REIS average market rent, CoStar Group
average effective rent, CoreLogic, Inc. single-family combined three-
bedroom median rent, Apartment List Rent Estimate, and Zillow Observed
Rent Index.
In calculating the AAF from these data, HUD first takes the annual
average of each statistic, then its year-to-year change. HUD then takes
the mean of changes from all available sources for each area. Next, HUD
takes an average of this private-sector measure of rent inflation with
rent inflation as captured by the CPI for the area, where the private-
sector measure is weighted at approximately 64 percent and the CPI rent
inflation measure is weighted at approximately 36 percent. HUD has
determined these weights by comparing the national average of the
private rent changes and changes in CPI rent of primary residence to
changes in the national average of recent mover rents from the American
Community Survey (ACS) from 2018 through 2023. HUD weights the private
data averages and overall CPI rent of primary residence in such a way
as to minimize the root mean squared error between the resulting
average and the ACS recent mover rents. For future AAFs, HUD will
update the weights by adding the most recent years of ACS recent mover
rents, private rent data, and CPI rent of primary residence to the
analysis.
HUD uses a local measure of private rent inflation for markets that
are covered by at least three of the six available sources of private
rent data. HUD combines this local measure of rent inflation with
either the local metropolitan area CPI rent of primary residence for
the 23 areas where such data exist or the regional CPI rent in areas
without a local index. For areas without at least three of the six
private rent data sources available, HUD uses a regional average of
private rent inflation factors alongside the regional CPI rent of
primary residence. HUD constructs the regional average by taking the
rental unit weighted average of the change in rents of each area in a
region that does have private rent data coverage. This ensures that
smaller areas that are not directly covered by the private sources will
still have current rental market conditions taken into account in the
calculation of the rent inflation factor for such areas.
The results of the above calculation are the ``Highest Cost Utility
Excluded'' AAF. For the ``Highest Cost Utility Included'' AAF, HUD
averages the result of this step with the year-to-year change in the
CPI housing fuels and utilities index for the area in to make the
resulting inflation measure reflective of gross rents.
VI. Area Definitions
To make certain they are using the correct AAFs, users should refer
to the Area Definitions Table section at <a href="https://www.huduser.gov/portal/datasets/aaf.html">https://www.huduser.gov/portal/datasets/aaf.html</a>. Furthermore, users can also search for AAF
area definitions using an online lookup tool available on HUD User at
the link in the previous sentence. AAFs are based on the updated
metropolitan area definitions published by the Office of Management and
Budget on July 21, 2023, and newly incorporated by the Census Bureau
into the 2023 ACS data and the corresponding FY 2026 FMRs.
John Gibbs,
Principal Deputy Assistant Secretary for Policy Development and
Research.
[FR Doc. 2025-22375 Filed 12-8-25; 8:45 am]
BILLING CODE 4210-67-P
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</html>Indexed from Federal Register on December 9, 2025.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.