In comments submitted to the Department of Housing and Urban Development (HUD) on January 10, LeadingAge supports the agency’s recent effort to improve affordable housing budget allotments for property insurance costs–and urges the agency to consider the limitations of the policy change and take additional action.

HUD on December 11, 2024 announced the 2025 Operating Cost Adjustment Factors (OCAFs), which incorporate feedback on property insurance issues LeadingAge previously presented in advocacy  to the agency. Specifically, HUD adjusted the calculation methods to use actual property insurance expenditures, leading to a higher adjustment to offset rising insurance costs.

LeadingAge members have navigated intense property insurance cost increases and coverage reductions over recent years. In surveys conducted of LeadingAge’s affordable housing membership, providers have reported double and triple digit increases, and OCAFs have not kept up with cost trends. 

In our January 10 comments to HUD, LeadingAge called out the inherent limits of the OCAF process, which utilizes a lookback approach and cannot utilize real-time data on insurance costs.

LeadingAge also noted that HUD’s new approach of utilizing data based on real expenditures by housing providers in the previous year will not reflect costs not incurred because providers couldn’t pay them; for example, LeadingAge members have reported reducing coverage and adopting higher deductible levels to bring premium costs down, both of which respond to unmanageable insurance costs in a way that won’t be reflected in HUD’s new calculation method.

Lastly, LeadingAge urged HUD to continue working on more holistic solutions for property insurance, including requests made in a separate letter to HUD last year.

Barring any substantial changes by the agency, the OCAFs as published will take effect for properties with contract anniversary dates on or after February 11, 2025.