RAD

HUD and USDA recently rescinded updated energy efficiency standards for new construction projects that were adopted in 2024. New construction projects—including those funded under the Public Housing Capital Fund, RAD, Choice Neighborhoods, PBVs, Section 202, Section 811, HOME, and Housing Trust Fund projects—must now comply with the energy efficiency standards that were in place prior to April 26, 2024. PHAs should review active and planned development projects to confirm energy standards that now apply and coordinate with architects, developers, and lenders accordingly. 

HUD and USDA cited rising construction costs, outdated economic assumptions, and the pending expiration of certain federal energy tax credits when announcing the immediate rescission.  

CLPHA’s RAD Rents Working Group Central to Policy Update

CLPHA applauds HUD’s newly announced policy allowing RAD project owners to request a one-time, good-cause exception to the standard Operating Cost Adjustment Factor (OCAF), a meaningful step toward addressing the financial strain many public housing authorities (PHAs) are facing. This change is especially important for early adopters of RAD, who have long struggled with operating cost increases that outpace annual OCAF adjustments. 

This policy update reflects the sustained advocacy of CLPHA’s RAD Rents Working Group, which has consistently elevated members’ concerns about the inadequacy of current rent-setting mechanisms. While HUD has acknowledged that this exception will not bring RAD rents to the level of Fair Market Rents (FMRs), it demonstrates a willingness to respond to the real-world challenges PHAs are experiencing. CLPHA is proud to see this progress and remains committed to working with HUD and our members to pursue further improvements to RAD rent sustainability through future changes to program operations. 

Starting September 30, 2025, RAD project owners may request a one-time, good-cause exception to the standard OCAF if they can demonstrate that cost increases are beyond their control and are causing severe financial strain. An overview of the submission and review process is available here.  

Owners will be prompted to answer a series of questions and upload concise supporting documentation to help HUD determine whether the project qualifies for an Alternative Operating Cost Factor (Alternative OCF) under extraordinary circumstances to be applied to the current RAD rents.  

If approved, the Office of Recapitalization (Recap) will calculate an Alternative OCF using administrative data on operating cost increases in the project’s market. The adjustment will take effect at the next contract anniversary date, subject to the availability of funding.   

Owners may either accept the Alternative OCF or request a more detailed, project-specific analysis if the initial adjustment does not sufficiently address the project’s financial viability. If a PHA requests an in-depth analysis from Recap, the previously  offered Alternative OCF based on administrative data will no longer be available.

Additionally, by accepting the Alternative OCF, the owner gives up any claim to missed or under-calculated OCAF adjustments from prior years.  

 

RAD Office Hours 

Recap will hold office hours for PHAs and their partners on the Alternative OCF on September 25 at 2:00 p.m. ET. 

• Join Exception to the Operating Cost Adjustment in RAD Conversions Via Teams
  • Meeting ID: 251 262 856 0367
  • Passcode: d7Na3iB2
  • Dial in by phone 202-510-9533, 53036552# 

CLPHA will continue to advocate for additional pathways to make RAD rents more sustainable, including future updates to RAD program operations notices.