- PBV Contract Terms.
- Method of Adjusting Contract Rents. Contract rents will be adjusted only by HUD’s OCAF at each anniversary of the HAP Contract, subject to the availability of appropriations for each year of the contract term.29 As such, section 8(o)(13)(I) of the Act and 24 CFR §§ 983.301 and 983.302, concerning rent determinations, shall not apply when adjusting rents. The rent to owner may at no time exceed the reasonable rent charged for comparable unassisted units in the private market, as determined by the Contract Administrator in accordance with 24 CFR § 983.303.30 However, the rent to owner shall not be reduced below the initial rent to owner for dwelling units under the initial HAP Contract.31 MTW agencies may not alter this requirement.
- Method of Adjusting Contract Rents. Contract rents will be adjusted only by HUD’s OCAF at each Anniversary of the HAP Contract, subject to (a) the availability of appropriations for each year of the contract term, and (b) the Maximum Rent, as defined below.43
The Maximum Rent is the higher of 140% of FMR (less utility allowances) or the market rents, as demonstrated by an RCS procured and paid for by the Project Owner. Where an RCS has been used to establish initial rents or to justify an OCAF adjusted rent that exceeds 140% of the FMR, the RCS will remain valid for five years, the Maximum Rent will not apply for the next four annual rent adjustments, and rents will be adjusted only by the OCAF during such period.
OCAFs for PBV PropertiesI have a PBV property which converted through RAD. How do I obtain the OCAF adjusted rents for this property?
Following conversion to PBV, the project’s contract rents are eligible for an annual OCAF adjustment at each HAP contract anniversary. The administering PHA (or independent entity, if the project is owned by the administering PHA) will be responsible for processing the OCAF and ensuring the owner is receiving the updated rent amounts. Please see the following instructions found in the “RAD PBV OCAF Adjustment Tool (Post-Closing)” spreadsheet available on the RAD Resource Desk Document Library: “Per the RAD Notice and the HAP Contract, the RAD contract rents are adjusted at each anniversary of the HAP contract by the Operating Cost Adjustment Factor (OCAF). 24 CFR 983.301 and 983.302 do not apply. For RAD PBV properties, contract rents are the lesser of reasonable rent and the OCAF-adjusted rent. HUD calculates and publishes the OCAF each year in the Federal Register. The OCAF is applied to the portion of a contract rent not committed to debt service. As a result, the rent adjustment can be more complex than simple multiplication. Further, the Federal Register notice states when the OCAF for each year takes effect - typically, a specified date in February. As a result, a contract with an anniversary date on January 1 or February 1 will usually use the OCAF for the prior year (e.g. a contract with a HAP anniversary date of January 1 will be adjusted on January 1 of 2018 by the 2017 OCAF).” This spreadsheet can assist in calculating what the rents should be, but this Tool is for internal calculation purposes only and does not need to be submitted to HUD.
OCAF Adjustments Prior to ClosingPrior to closing, how are my CHAP rents increased by OCAF?
HUD will increase the RAD contract rents included in the CHAP each year by the published OCAF. For properties awarded under the original 60,000 unit cap with initial contract rents based on FY 2012 funding levels (“FY 12 RAD rent base year”), the first OCAF adjustment occurred in 2014 and will occur each year thereafter until closing. Thus, for a project in this category that closes with a HAP effective date of January 1, 2017, the initial contract rents are based on 2012 funding, increased by the 2014, 2015, 2016, and 2017 OCAFs. For properties awarded above HUD’s original 60,000 unit cap but subject to the increased 185,000 cap with initial contract rents based on FY 2014 funding levels (“FY 14 RAD rent base year”), the first OCAF adjustment occurred in 2015 and will occur each year thereafter until closing. Thus, for a project in this category that closes with a HAP effective date of January 1, 2017, the initial contract rents will be based on 2014 funding, increased by the 2015, 2016, and 2017 OCAF. Note: Because the OCAF adjustments are generally published in October for the following calendar year, beginning in CY 2017 HUD plans to update all CHAP rents by the applicable OCAF adjustments before the start of the calendar year.