Housing Choice Vouchers

Flat funding adjustments arrive amid a $700 million shortfall, rising local costs, and HUD directives to cut program spending.

Comments on the methodology due August 5.

Nearly 60 percent of CLPHA members will receive a 0 percent inflation adjustment to their HCV renewal funding for fiscal year 2026, according to CLPHA's analysis of HUD's newly published renewal funding inflation factors (RFIFs), the annual adjustments HUD applies to each PHA's HCV renewal funding to account for local changes in rents, utility costs, and tenant incomes. The FY26 factors are final and took effect July 6, 2026. CLPHA will be submitting comments on the RFIF methodology and the proposed FY27 changes and strongly encourages members to do the same. 

A zero percent factor means these agencies' renewal funding will not be adjusted for local cost growth. This comes in an environment where costs continue to rise and fair market rents (FMRs) struggle to keep pace with local market conditions. Nationally, HUD found the expected change in per unit cost (PUC) to be 2.337 percent, a 2.3 percentage point decrease from FY25.

Members are already absorbing a deepening shortfall

The zeroed-out inflation factors land on agencies already under acute fiscal strain. HUD currently estimates a funding shortfall of $700 million in the voucher program this calendar year. In letters to PHA Executive Directors, the Department has directed agencies to immediately implement cost-saving measures to address anticipated shortfalls.

Several CLPHA members have already taken these steps, including:

• Pausing the issuance of new vouchers
• Increasing total tenant payments from 30 percent to 40 percent of income
• Raising minimum rents

Each of these measures shifts costs onto low-income families or reduces the number of households served. Members are doing their part to contain costs, but a zero percent inflation factor works against those efforts by locking renewal funding below actual local cost growth, leaving agencies to close the gap through further program contraction. CLPHA remains concerned that the RFIF methodology leaves members vulnerable to shortfall in their voucher programs. 

The RFIF methodology is not keeping pace with local costs 

To estimate rent inflation, HUD blends two data sources, Fair Market Rents (FMRs) and the CPI gross rent index, weighting them at roughly 56% and 44%, respectively.  For each geographic area, the inflation factor itself reflects the year-over-year change in that area's FMR from FY25 to FY26, and HUD then applies these area-specific factors to each PHA's eligible renewal funding using leasing and cost figures pulled from VMS data for the prior calendar year.

CLPHA's analysisreview shows this methodology is not keeping pace with local market cost increases. One CLPHA member reported an 80% increase in their average HAP payment over the last three years but received an inflation factor of 0% and have therefore had to raise minimum rents for work-abled households.  Another CLPHA member also received a 0% inflation factor, despite having a 102% budget utilization. While FY26 factors are final, HUD is accepting public comments on the methodology used to calculate them through August 5, 2026, and changes that could shape future years' factors. CLPHA continues to urge HUD to incorporate private sector rental data and local PUC increase data to support these calculations so that inflation factors reflect the costs PHAs face. 

HUD is proposing to penalize areas for local policies outside PHA control

In the FY26 RFIF notice, HUD is soliciting comments on a potential change to the FY27 RFIF methodology that would reduce an area’s RFIF where HUD determines that local land use, permitting and other regulatory policies are contributing to rent cost growth. While HUD has not specified how it would measure “policy-driven” inflation or how large the adjustment to the inflation factor would be, the effect would be to shrink renewal funding for local jurisdictions based on policies out of the control of PHAs. 

Setting zoning codes, controlling permitting timelines, and decisions on land-use ordinances are done by city councils, county boards, and state legislatures. Adjusting the renewal funding based on these policies would penalize PHAs despite having no role in creating them, yet the impact will be most felt by CLPHA member PHAs in high-cost urban areas where the PUC growth has routinely outpaced RFIFs.

Renewal funding should reflect the real cost of the units PHAs lease to voucher holders, not serve as a mechanism to penalize agencies for local policies out of their control. CLPHA strongly opposes incorporating a local land-use or policy-based adjustment to the RFIF and urges HUD to withdraw this proposal. Should HUD continue with this methodology change, CLPHA asks that HUD postpone its implementation pending further study of local policies and consultation with PHAs. 

What members can do

• Submit comments by August 5, 2026. CLPHA will be submitting comments on the RFIF methodology and the proposed FY27 changes and strongly encourages members to do the same. Comments may be submitted electronically through the Federal eRulemaking Portal at regulations.gov and must reference Docket No. FR-6607-N-01.
• Contact HUD about shortfalls. For PHAs experiencing shortfall, HUD is offering technical assistance throughout 2026. PHAs whose PUC increases are outpacing their RFIFs should contact [email protected].
• Review your agency's factor. The full dataset is available at FY26 Renewal Funding Inflation Factors.

For questions about this notice, contact Madeline Morris at [email protected].