UPDATE: The 2026 HUD AAFs are now out. You can find them at this link.
2026 HUD AAFs, or Annual Adjustment Factors (AAFs), land this week. That’s according to the Federal Register, which will publish an official version of the notice below on December 9, 2025. It covers how HUD will adjust certain Section 8 rents and required reserve deposits using updated inflation data.
If you own or manage Section 8 properties under older project-based contracts, these factors matter. They influence cash flow, reserves, and long‑term planning.
Understanding 2026 HUD AAFs
Annual Adjustment Factors (AAFs) are HUD’s rent inflation factors. They are used to adjust certain Section 8 contract rents and required Reserve for Replacement deposits each year.
HUD bases the 2026 AAFs on changes in residential rents and utility costs. The formula uses Consumer Price Index (CPI) data and six private rent data sources, then blends them.
In practice, AAFs apply when:
- Your contract is still in its original, pre‑renewal term.
- Your rent adjustment method is “AAFs” rather than purely budget‑based.
- You must also adjust the Reserve for Replacement deposit annually.
AAFs do not replace other tools like Operating Cost Adjustment Factors (OCAFs) or Renewal Funding Inflation Factors. Those tools apply to different contracts and funding streams.
What Changed for 2026
- No major rule changes this year — just updated inflation numbers.
- AAFs are still based on rent and utility cost data from the most recent year.
- Two tables remain:
- Table 1: Used for units with new households since the last contract anniversary.
- Table 2: Used for units with the same households — 0.01 lower than Table 1, unless it would drop below 1.0 .
- Reserve for Replacement deposits must still increase each year using the “Highest Cost Utility Excluded” AAF for your area.
The updated factors take effect on your property’s next contract anniversary after December 9, 2025.
You can view the full AAF tables and documentation on HUD User:
We also recommend bookmarking HUD’s Federal Register page:
If you need a refresher on Section 8 basics, visit our internal resource hub:
How 2026 HUD AAFs Could Change Contract Rents
The 2026 HUD AAFs work differently across program categories. HUD groups them into:
- Category 1: New Construction, Substantial Rehab, and Moderate Rehab.
- Category 2: Loan Management Set‑Aside (LMSA) and Property Disposition (PD).
- Category 3: Reserve for Replacement deposits only.
In Category 1, HUD applies the published AAF to the pre‑adjustment contract rent (or base rent for Moderate Rehab). It then checks rent comparability if the gross rent is above the Fair Market Rent for the area.
If the comparable market rent is lower than the adjusted rent, the comparable rent becomes the new contract rent. However, HUD will not decrease the pre‑adjustment contract rent through comparability alone.
In Category 2, HUD does not currently require comparability studies. The AAF is simply applied, unless HUD issues new rules.
For both categories, HUD uses two AAF tables:
- Table 1 for units with a new family since the last HAP anniversary.
- Table 2 for units with the same family as the last anniversary.
Table 2 factors are always 0.01 lower than Table 1, unless the factor would drop below 1.0. In that case, it is set at 1.0 as required by law.
Congress designed that “tenure discount” because long‑term tenants usually generate lower vacancy and turnover costs. Assisted properties have lower turnover, so HUD expects some savings.
For each unit, you must also decide whether the “highest cost utility” is included in the contract rent:
- If the owner pays that utility, use the “Highest Cost Utility Included” column.
- If the tenant pays it, use the “Highest Cost Utility Excluded” column.
You can find the correct geographic factor through HUD’s AAF lookup tools. These tools match your project’s location to the right region or metro component.
For Navigate partners, our team can walk through this selection process. Start by contacting your usual Navigate asset or contract manager. Or visit our Contact page to connect with our specialists.
Preparing for 2026 HUD AAFs at Your Property
Here is a step‑by‑step way to prepare for 2026 HUD AAFs.
1. Confirm your contract type and adjustment method.
Check whether your HAP contract uses AAFs during the original term, or uses budget‑based adjustments or OCAFs. Remember, AAFs do not apply to tenant‑based and project‑based voucher rents.
2. Identify each unit’s status.
For each assisted unit, note whether a new household has moved in since the last anniversary. New households point you to Table 1. Long‑term households point you to Table 2.
3. Clarify who pays the highest cost utility.
Decide whether that utility is included in the contract rent or paid by the tenant. This choice determines which AAF column you use.
4. Use HUD’s AAF tools.
Go to the HUD User AAF page and select your state and county. The tool will show your metro or regional AAF area and the correct factor.
5. Adjust the Reserve for Replacement deposit.
HUD requires that reserve deposits increase each year by the “Highest Cost Utility Excluded” AAF for your area. This adjustment applies regardless of vacancy.
Strong reserve planning supports long‑term property health and resident stability. It also positions your community for future rehabilitation or green upgrades.
6. Model the impact on your budget.
Once you have the correct 2026 HUD AAFs, model rent changes and reserve increases. Look at:
- Debt coverage ratios.
- Capital improvement plans.
- Service and staffing levels.
This step is especially important for nonprofit owners and mission‑driven operators. Small shifts in allowable rents can shape the scope of resident services.
7. Coordinate with your PBCA or HUD office.
If Navigate serves as your Performance-Based Contract Administrator, reach out early. Our team can:
- Verify your contract’s adjustment method.
- Confirm your selected AAFs.
- Help you understand comparability and rent reasonableness requirements.
