How RAD rents are set and how they change each year

RAD does not come with new money. HUD’s rule is that a converting project gets, as its Section 8 contract rent, roughly what it receives today in public housing subsidy and tenant rent. Everything about RAD finance follows from that: the rent is fixed by HUD, the cap is set by fair market rent, and the annual increase is a published factor, not a negotiation.

Step 1: the RAD rent base year

Under Attachment 1C of the RAD notice, each project’s initial rent is built from its funding in a “RAD rent base year”:

• the project’s Operating Fund subsidy per unit per month,
• its Capital Fund amount per unit per month, and
• its tenant rents per unit per month.

The base year resets every two years. Recent cycles from the notice’s Table 2:

CHAPs issued	RAD rent base year	First OCAF applied
Jan 1, 2019 to Dec 31, 2020	FY 2018	2019
Jan 1, 2021 to Dec 31, 2022	FY 2020	2021
Jan 1, 2023 to Dec 31, 2024	FY 2022	2023
Jan 1, 2025 to Dec 31, 2026	2024 funding levels, adjusted by the 2025 and 2026 OCAFs	2025

The last row comes from HUD’s RAD Contract Rents Look-Up Tool, updated May 27, 2026, which applies to CHAPs and amended CHAPs issued from January 1, 2025 through December 31, 2026. Under the notice’s two-year cycle a new base year would follow for CHAPs issued from 2027. As of October 30, 2026 HUD had not published it.

Until conversion, the base-year rent keeps rolling forward by each year’s OCAF and is set in the HAP contract at closing.

Step 2: the caps

	RAD PBV	RAD PBRA
Initial rent is the lowest of	Reasonable rent; 110% of FMR (or the exception payment standard, or an approved MTW rent cap) minus utility allowance; or the owner’s request	The RAD rent, up to 120% of FMR minus utility allowance
Exception	None above 110%	With a rent comparability study, up to the lower of market rent or 150% of FMR
Notice section	§1.6.B.5	§1.7.A.5

FMR is HUD’s fair market rent for the area. The Look-Up Tool compares each project’s rent with FY2026 FMRs. HUD published FY2027 FMRs at 91 FR 56156 on September 1, 2026, effective October 1, 2026, so caps at closing may differ from the tool.

Step 3: rent flexibilities

The notice lets a housing authority move money around within its total subsidy:

• Rent bundling. Rents can be shifted from one converting project to another, as long as the aggregate subsidy does not rise, which lets a project with a heavy scope carry more debt.
• MTW fungibility. Moving to Work agencies can use their flexibility to raise initial rents.
• Forgoing DDTF. A housing authority can give up demolition and disposition transitional funding to raise rents.
• Utility savings and PBV site-specific utility allowances.
• Opportunity Zones (PBRA only). Up to $100 per unit per month for new construction or substantial rehab (hard costs above 60% of HUD’s Housing Construction Costs) in a designated Opportunity Zone, first come, first served.
• Blends. A RAD/Section 18 blend raises the average rent with tenant protection voucher units. See blends explained.

What the 2026 rents look like

From HUD’s Look-Up Tool (May 27, 2026), across all 6,191 unconverted public housing projects (881,789 units):

Measure	Figure
Median 2026 RAD contract rent	$934 per unit per month
Median RAD gross rent as a share of FMR	84%
Projects at 100% of FMR or more	1,554
Projects at 75% to 99% of FMR	2,457
Projects at 50% to 74% of FMR	1,859
Projects below 50% of FMR	321

The lower a project sits against FMR, the less debt its rent supports and the more a blend, bundling or another source matters. Every project’s rent, caps and blend estimates are on the rent check, and each housing authority’s projects are on its page under states.

Step 4: annual increases (OCAF)

After conversion, the statute says the initial long-term contract may adjust rents “only by an operating cost factor established by the Secretary”. That factor is the OCAF, published each year in the Federal Register.

• 2026 OCAF: 91 FR 4934, February 3, 2026 (FR Doc. 2026-02201). Applies to anniversaries on or after February 11, 2026. National average 5.1%; Maine is lowest at 3.3% and the Virgin Islands highest at 12.3%; Louisiana is 9.8% and Florida 8.2%.
• 2025 OCAF: 89 FR 99893.
• 2027 OCAF: not published as of October 30, 2026.

Rules that change how it bites:

• Debt service is excluded. For public housing conversions the OCAF is applied only to the part of the rent not committed to debt service. A deal with heavy debt service gets a smaller dollar increase.
• PBV ceiling and floor. PBV rent can never exceed reasonable rent for comparable unassisted units, but never falls below the initial rent under the first contract.
• PBRA Maximum Rent. PBRA increases are limited by a Maximum Rent: the higher of 140% of FMR less utilities, or market rent shown by an owner-paid rent comparability study. An RCS used to set or justify rents above 140% stays valid for five years.

When the OCAF is not enough

Supplemental Notice 4C (§IV) created a waiver: in “extraordinary circumstances” an owner can ask HUD’s Office of Recapitalization for an alternative operating cost factor, and for PBV the contract administrator must consent. HUD’s 2026 voucher funding notice (PIH 2026-12 Rev. 2, June 9, 2026) lets housing authorities in a confirmed voucher funding shortfall submit extraordinary factor requests for RAD properties but not put any into effect until the shortfall ends. Law firms also reported a one-time good-cause rent adjustment process opening September 30, 2025; we have not confirmed its terms on a HUD document.

How rent turns into debt

A lender sizes the loan on net operating income from the HAP rents. Two feasibility rules from 4C frame it: leveraged deals should show debt service coverage of at least 1.11 over ten years at 2% revenue and 3% expense growth, and FHA’s ML 2025-03 underwrites properties with 90% or more assisted units at 1.11 coverage. The RAD debt sizer runs those numbers from a project’s HUD rent, and the financing breakdown shows how closed deals were funded. Owners and housing authorities can send a project to Janover Capital LLC’s desk at get financing.

Related: what is RAD, PBV vs PBRA, RAD glossary.

Sources

• HUD, RAD Contract Rents Look-Up Tool, last updated May 27, 2026; medians and counts computed by Conversion Ledger.
• HUD, RAD Notice Revision 4 as amended by Supplementals 4B and 4C: §1.6.B.5 and B.6, §1.7.A.5 and A.6, Attachment 1C (Table 2).
• HUD, RAD Supplemental Notice 4C, H-2025-01 / PIH-2025-03, §IV and §X.
• HUD, Operating Cost Adjustment Factors for 2026, 91 FR 4934, February 3, 2026.
• HUD, Fair Market Rents for Fiscal Year 2027, 91 FR 56156, September 1, 2026 (FR Doc. 2026-17891).
• HUD, Notice PIH 2026-12, HCV funding, Rev. 2, June 9, 2026.
• HUD OGC, RAD statute compilation, March 19, 2024.
• HUD, Mortgagee Letter 2025-03, January 8, 2025.

This guide is general information, not legal advice. HUD sets each project’s rent in its CHAP and HAP contract.