SUPPLEMENTARY INFORMATION:

I. Background

Division D, Title II of the Consolidated Appropriations Act, 2026, requires that the HUD Secretary, for the calendar year 2026 funding cycle, provide renewal funding for each PHA based on validated voucher management system (VMS) leasing and cost data for the prior calendar year and by applying an inflation factor, as established by the Secretary, by notice published in the Federal Register . This notice announces the FY 2026 inflation factors and describes the methodology for calculating them. Tables in PDF and Microsoft Excel formats showing RFIFs by HUD FMR Area are available electronically at: https://www.huduser.gov/​portal/​datasets/​rfif/​rfif.html.

II. Methodology

RFIFs are used to adjust the allocation of HCV renewal funds to PHAs for local changes in rents, utility costs, and tenant incomes. To calculate the RFIFs, HUD first forecasts a national inflation factor, which is the annual change in the national average PUC. HUD then calculates individual area inflation factors, which are based on the annual change in the two-bedroom FMR for each area. Finally, HUD adjusts the individual area inflation factors to be consistent with the national inflation factor.^[1]

Since FY 2017, HUD's method of projecting the national average PUC has been based on independent forecasts of gross rent and tenant income. Each forecast is produced using historical and forecasted macroeconomic data as independent variables, where the macroeconomic data forecasts are consistent with the Economic Assumptions of the Administration's Budget. HUD calculates a “notional” PUC as the difference between the gross rent value and 30 percent of tenant income (the standard for tenant rent contribution in the voucher program). HUD uses a notional PUC as opposed to the actual PUC to project costs that are consistent with PHAs leasing the same number and quality of units. The change between the forecasted CY 2026 notional PUC and the CY 2025 notional PUC is the expected national change in PUC, which for 2026 is 2.337 percent.

HUD continues to use the methodology refined in FY 2025 for developing the gross rent component of the national PUC forecast. Under this approach, the gross rent component is based on a combination of projected recent-mover rents, as represented by the national average FMR, and rents for in-place tenants, as represented by the national gross rent CPI. By regulation, FMRs are required to reflect rents paid by recent movers, which HUD defines as renter households that moved into their current residence within the past one or two years. For purposes of forecasting PUC, the gross rent component is intended to reflect the full composition of tenants in the HCV program, including new admissions and recent movers as well as those staying in place. When calculating the gross rent component of PUCs, the national FMR is weighted at approximately 56 percent, and the national CPI gross rent inflation index measure is weighted at approximately 44 percent, unchanged from the weights used in 2025. HUD determined the weights empirically in a manner that best predicts the historical voucher tenant's average gross rents.^[2]

The inflation factor for an individual geographic area is based on the change in the area's two bedroom FMR between FY 2025 and FY 2026. These changes in FMRs are then scaled such that the voucher-weighted average of all individual area inflation factors is equal to the national inflation factor, i.e., the expected annual change in national PUC from CY 2025 to CY 2026, and such that no area has a factor less than one. For PHAs operating in multiple FMR areas, HUD calculates a voucher-weighted average inflation factor based on the count of vouchers in each FMR area administered by the PHA as captured in HUD administrative data as of December 31, 2025. ( printed page 41060)

III. The Use of Inflation Factors

HUD subsequently applies the calculated individual area inflation factors to eligible renewal funding for each PHA based on VMS leasing and cost data for the prior calendar year.

IV. Geographic Areas and Area Definitions

As explained above, inflation factors based on area FMR changes are produced for all FMR areas and applied to eligible renewal funding for each PHA. The tables showing the RFIFs, available electronically from the HUD data information page, list the inflation factors for each FMR area on a state-by-state basis. The inflation factors use the same Office of Management and Budget (OMB) metropolitan area definitions, as revised by HUD, that are used in FY 2026 FMRs. PHAs should refer to the Area Definitions Table on the following web page to make certain that they are referencing the correct inflation factors: http://www.huduser.org/​portal/​datasets/​rfif/​FY2026/​FY2026_​RFIF_​FMR_​AREA_​REPORT.pdf. The Area Definitions Table lists areas in alphabetical order by state and the counties associated with each area. In the six New England states, the listings are for counties or parts of counties as defined by towns or cities. Note that for purposes of RFIF calculation and publication, HUD groups all towns in Connecticut with their respective metropolitan statistical areas or non-metropolitan planning district, unlike the FY 2026 FMR publication, where HUD listed certain towns as exception areas to preserve the limit on year-to-year declines in FMRs. HUD is also releasing the data in Microsoft Excel format to assist users who may wish to use these data in other calculations. The Excel file is available at https://www.huduser.gov/​portal/​datasets/​rfif/​rfif.html. Note that, as described earlier, the actual renewal funding inflation factor applied to agency funding will be the voucher-weighted average of the FMR area factors when the PHA operates in multiple areas.

V. Request for Comment

HUD accepts public comments on the methods used to calculate renewal funding inflation factors for 30 days after the publication of this notice. Although HUD will not adjust the FY 2026 inflation factors, HUD will consider any comments for potential changes to the RFIF methodology in FY 2027.

In addition to seeking general public comments on the FY 2026 methodology, HUD is considering further changes to the local inflation factor for incorporation into the FY 2027 RFIF. As described in the Methodology section above, HUD uses the RFIF to calculate HCV renewal funds to account for local changes in rents and utility costs, and national changes in tenant incomes. Among other requirements, Division D, Title II of the Consolidated Appropriations Act, 2026 requires the Secretary to incorporate an inflation factor in its allocation formula, and HUD's methodology currently adjusts allocations both based on local inflation (as measured by the two-bedroom FMR for each area) and by a national inflation factor. However, local housing and land-use policies can influence the cost of housing by altering the supply of housing. On the margin, the current RFIF methodology may result in increasing the relative allocation of HCV funding toward PHAs in jurisdictions where local housing inflation is driven by local policies and decreasing the relative allocation to PHAs in jurisdictions that have done a more effective job calibrating local policies to address housing demand.

HUD is considering whether, beginning with the FY 2027 RFIF, it should refine the local inflation component of the RFIF methodology to incorporate an additional factor which considers the extent to which rent inflation in a local market may be influenced by local land use policies, permitting practices, or other local regulatory or policy factors that impact new housing supply. HUD recognizes that local rent growth may reflect multiple factors, including changes in demand, construction costs, interest rates, utility costs, tenant income, and regulatory constraints. At the same time, HUD is interested in whether the RFIF methodology could be improved to avoid allocating shares of renewal funding to areas where rent increases may be substantially impacted by policy-driven determinants of housing supply.

HUD seeks comment on whether and how any such adjustment could be designed using objective, transparent, and annually available measures.

HUD specifically seeks comment on the following questions:

1. Should HUD consider adjusting the FY 2027 RFIF methodology to incorporate a factor that discounts the full local inflation adjustment in areas where there is an indication that housing supply is relatively constrained, such as constraints on land use, permitting, or development approval policies? Should HUD consider incorporating a markup on the full local inflation adjustments in areas where there is an indication that housing supply is relatively unconstrained?

2. What type of factor could HUD incorporate into the RFIF methodology to modify the full inflation adjustment for areas with particularly high or low housing supply or regulatory restrictions on housing construction?

3. What data sources that are already publicly available and regularly updated should HUD consider using in developing a factor that identifies areas with particularly high or low housing supply or regulatory restrictions on housing construction? Should HUD consider, for example, building permits issued or housing completions, housing units relative to population or job growth, rent-to-income trends, price-to-construction cost ratios, or some other measure or measures? What sources provide this information? How should HUD incorporate the measure(s) into the inflation factor?

4. What methodologies exist to effectively provide comparative restrictiveness of land-use policies across jurisdictions that have in place a wide variety (both in number and scale) of housing-related policies?

5. Given that local rent inflation may be affected by factors not controllable by a jurisdiction, such as changes in demand, construction costs, interest rates, or utility costs, how could HUD calibrate this factor to account both for particularly high or low housing supply and, respectively, significant or limited regulatory restrictions to housing construction?

6. Should the methodology consider only year-over-year changes or account for multi-year periods?

7. If HUD were to set a cap or limit to how much the local inflation factor would be altered for areas where it is determined that supply or regulations on housing construction are impacting local inflation, what should that limit be and how should HUD incorporate it into the formula?

8. Given that many PHAs administer a small number of HCVs, are there other ways that HUD could target this methodological change toward areas where it may have the greatest impact while minimizing complexity, such as, for example, only applying the alternative methodology to PHAs that administer above a certain threshold of HCVs ( e.g. 2,000 HCVs annually)?

9. Are there other methodological, programmatic, regulatory, or statutory considerations HUD should take into account when developing this factor? ( printed page 41061)

VI. Environmental Impact

This notice involves a statutorily required establishment of a rate or cost determination which does not constitute a development decision affecting the physical condition of specific project areas or building sites. Accordingly, under 24 CFR 50.19(c)(6), this notice is categorically excluded from environmental review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321).

[FR Doc. 2026-13542 Filed 7-2-26; 8:45 am]

BILLING CODE 4210-67-P