Operating Cost Adjustment Factors (OCAF) OCAF rates are used to - - PowerPoint PPT Presentation

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Operating Cost Adjustment Factors (OCAF) OCAF rates are used to determine the rent increase adjustments for Section-8 properties HUDRentStudy.com 6 Operating Cost Adjustment Factors (OCAF) OCAF rates are used to determine the rent

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SLIDE 1

Operating Cost Adjustment Factors (OCAF)

  • OCAF rates are used to determine the rent

increase adjustments for Section-8 properties

HUDRentStudy.com

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SLIDE 2

Operating Cost Adjustment Factors (OCAF)

  • OCAF rates are used to determine the rent

increase adjustments for Section-8 properties

  • OCAF rates vary by state. Since 2008 state

OCAFS have been between 100% below the national average to 188% above the national

  • average. In the long-term, there will be a

reversal as the state’s OCAF regresses to the mean.

HUDRentStudy.com

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SLIDE 3

Operating Cost Adjustment Factors (OCAF)

  • OCAF rates are used to determine the rent

increase adjustments for Section-8 properties

  • OCAF rates vary by state. Since 2008 state OCAFS

have been between 100% below the national average to 188% above the national average. In the long-term, there will be a reversal as the state’s OCAF regresses to the mean.

  • Budgets for 3-5 year projections must take

regression to the mean into account

HUDRentStudy.com

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SLIDE 4

Operating Cost Adjustment Factors (OCAF)

  • OCAF rates are used to determine the rent

increase adjustments for Section-8 properties

  • OCAF rates vary by state. Since 2008 state OCAFs

have ranged between 50% of the national average to nearly 100% above the national

  • average. In the long-term, each trend will reverse

as the state’s OCAF regresses to the mean.

  • Budgets for 3-5 year projections must take

regression to the mean into account

  • Rent Studies can offer a financially viable

alternative to adverse OCAF Rates

HUDRentStudy.com

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Doyle Real Estate Advisors, LLC

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SLIDE 5

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 2009 2010 2011 2012 2013 2014 2015 Ohio US Average

Ohio Operating Cost Adjustment Factors, 2008-2015

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SLIDE 6

Texas Operating Cost Adjustment Factors, 2008-2015

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 2009 2010 2011 2012 2013 2014 2015 Texas US Average

HUDRentStudy.com 11

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SLIDE 7

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 2009 2010 2011 2012 2013 2014 2015 Illinois US Average

Illinois Operating Cost Adjustment Factors, 2008-2015

Doyle Real Estate Advisors, LLC HUDRentStudy.com 12

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SLIDE 8

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 2009 2010 2011 2012 2013 2014 2015 New Jersey US Average

New Jersey Operating Cost Adjustment Factors, 2008-2015

Doyle Real Estate Advisors, LLC HUDRentStudy.com 13

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SLIDE 9

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 2009 2010 2011 2012 2013 2014 2015 Michigan US Average

Michigan Operating Cost Adjustment Factors, 2008-2015

Doyle Real Estate Advisors, LLC HUDRentStudy.com

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SLIDE 10

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 2009 2010 2011 2012 2013 2014 2015 Washington US Average

Washington State Operating Cost Adjustment Factors, 2008-2015

Doyle Real Estate Advisors, LLC HUDRentStudy.com 15

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SLIDE 11

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 2009 2010 2011 2012 2013 2014 2015 Massachussetts US Average

Massachusetts Operating Cost Adjustment Factors, 2008-2015

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SLIDE 12

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 2009 2010 2011 2012 2013 2014 2015 District of Columbia US Average

District of Columbia Operating Cost Adjustment Factors, 2008-2015

Doyle Real Estate Advisors, LLC HUDRentStudy.com 17

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SLIDE 13

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 2009 2010 2011 2012 2013 2014 2015 Minnesota US Average

Minnesota Operating Cost Adjustment Factors, 2008-2015

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SLIDE 14

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 2009 2010 2011 2012 2013 2014 2015 Pennysvlania US Average

Pennsylvania Operating Cost Adjustment Factors, 2008-2015

Doyle Real Estate Advisors, LLC HUDRentStudy.com 19

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SLIDE 15

OCAF vs. Rent Studies as Financial Training Tools

  • While some states have seen higher-than

national average OCAF adjustments, these are highly probable to regress to the mean in the future via several years of below-average OCAF

HUDRentStudy.com 20

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SLIDE 16

OCAF vs. Rent Studies as Financial Training Tools

  • While some states have seen higher-than

national average OCAF adjustments, these are highly probable to regress to the mean in the future via several years of below-average OCAF

  • Section-8 properties located in low OCAF

states and in a strong local market will not achieve their maximum revenue potential

HUDRentStudy.com 21

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SLIDE 17

OCAF vs. Rent Studies as Financial Training Tools

  • While some states have seen higher-than

national average OCAF adjustments, these are highly probable to regress to the mean in the future via several years of below-average OCAF

  • Section-8 properties located in low OCAF states

and in a strong local market will not achieve their maximum revenue potential

  • Mid-contract rent studies can be useful in

achieving market-rate adjustments

HUDRentStudy.com 22

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SLIDE 18
  • I. Macroeconomic Scale - States
  • National OCAF vs. State OCAF

Financial Planning Tool

HUDRentStudy.com

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SLIDE 19
  • I. Macroeconomic Scale - States
  • National OCAF vs. State OCAF
  • OCAFs will Eventually Regress to the Mean:

– If Below US Average Increase to Mean

  • Annual rent percent adjustment will increase

– If Above US Average Decline to Mean

  • Annual rent percent adjustment will decrease

Financial Planning Tool

HUDRentStudy.com

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SLIDE 20
  • I. Macroeconomic Scale - States
  • National OCAF vs. State OCAF
  • OCAFs will Eventually Regress to the Mean:

– If Below US Average Increase to Mean

  • Annual rent percent adjustment will increase

– If Above US Average Decline to Mean

  • Annual rent percent adjustment will decrease
  • II. Microeconomic Scale – Metropolitan Areas
  • Metro Market Rent Trends vs. State OCAF

Financial Planning Tool

HUDRentStudy.com

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SLIDE 21

2011-2014 Overall Rate

State 2015 OCAF 4-YR US Average OCAF OCAF Projection: Above (Below) 4- YR Average Houston

13.6%

MKT 3.1% OCAF

7.1%

OCAF 1.7% 2.4% 1.9% 4-YR Average Annual Rate

Financial Planning Tool

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SLIDE 22

Year 2010

2011-2014 Overall Rate

State 2015 OCAF 4-YR US Average OCAF

OCAF Projection: Above (Below) 4- YR Average

Philadelphia 9.4%

MKT 2.2%

OCAF 4.1% 9.1%

OCAF 2.2% 2.0% 1.9%

Detroit 8.1%

MKT 1.9%

OCAF 3.8% 8.3%

OCAF 2.0% 1.4% 1.9%

Cleveland 7.2%

MKT 1.7%

OCAF 5.4% 7.6%

OCAF 1.9% 2.0% 1.9%

Northern New Jersey 8.9%

MKT 2.1%

OCAF 5.5% 6.1%

OCAF 1.5% 2.0% 1.9%

Chicago 9.7%

MKT 2.3%

OCAF 4.6% 5.0%

OCAF 1.2% 1.7% 1.9%

Washington D.C. 10.5%

MKT 2.5%

OCAF 5.2% 6.7%

OCAF 1.6% 2.3% 1.9%

Boston 10.6%

MKT 2.5%

OCAF 5.6% 6.2%

OCAF 1.5% 2.4% 1.9%

Minneapolis 12.3%

MKT 2.8%

OCAF 5.3% 6.7%

OCAF 1.6% 2.4% 1.9%

Houston 13.6%

MKT 3.1%

OCAF 5.5% 7.1%

OCAF 1.7% 2.4% 1.9%

Seattle 20.3%

MKT 4.5%

OCAF 3.9% 9.8%

OCAF 2.4% 2.2% 1.9%

US AVERAGE OCAF 4.7% 7.7%

OCAF 1.9% 2.1% 1.9%

Source:Federal Register (2008-2014); Marcus & Millichap's National and Regional Surveys (2008-14); Cassidy Turley, 2014 Asking Rents; HUDRentStudy.com

4-YR Average Annual Rate

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SLIDE 23

$1,000 $1,020 $1,040 $1,060 $1,080 $1,100 $1,120 $1,140 2010 2011 2012 2013 2014

Philadelphia Rent Trends

Market Rents OCAF Rents

Market Equal to OCAF

Year 2010 2011 2012 2013 2014 2011-2014 Overall Rate State 2015 OCAF 4-YR US Average OCAF OCAF Projection: Above (Below) 4-YR Average Philadelphia Market $1,027 $1,053 $1,078 $1,117 $1,123 Year over Year Change 1.3% 2.5% 2.3% 3.4% 0.6% 9.4% MKT 2.2% OCAF 4.1% 2.0% 2.0% 2.3% 2.5% 9.1% OCAF 2.2% 2.0% 1.9% 4-YR Average Annual Rate

HUDRentStudy.com

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SLIDE 24

$720 $730 $740 $750 $760 $770 $780 $790 2010 2011 2012 2013 2014

Cleveland Rent Trends

Market Rents OCAF Rents

Market Below OCAF

Year 2010 2011 2012 2013 2014 2011-2014 Overall Rate State 2015 OCAF 4-YR US Average OCAF OCAF Projection: Above (Below) 4-YR Average Cleveland Market $726 $742 $761 $780 $778 Year over Year Change 0.5% 2.2% 2.4% 2.4% -0.2% 7.2% MKT 1.7% OCAF 5.4% 2.1% 1.7% 1.9% 1.7% 7.6% OCAF 1.9% 2.0% 1.9% 4-YR Average Annual Rate

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SLIDE 25

REACTIVE

  • Re-invest

– Curb Appeal and Capital Improvements

– Administration: Outreach to quasi-public and government services

Market Below OCAF

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SLIDE 26

REACTIVE

  • Re-invest

– Curb Appeal and Capital Improvements

– Administration: Outreach to quasi-public and government services

  • Reposition

– Senior: Pull cords, Aging in Place Services – Family: After school enrichment, employment coaching, GED

Market Below OCAF

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SLIDE 27

REACTIVE

  • Re-invest

– Curb Appeal and Capital Improvements

– Administration: Outreach to quasi-public and government services

  • Reposition

– Senior: Pull cords, Aging in Place Services – Family: After school enrichment, employment coaching, GED

  • Rent Increase

– Administrative Assistant recast as Service Coordinator

(Job Description)

  • Line 32 Rent adjustment

Market Below OCAF

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SLIDE 28

REACTIVE

  • Re-invest

– Curb Appeal and Capital Improvements

– Administration: Outreach to quasi-public and government services

  • Reposition

– Senior: Pull cords, Aging in Place Services – Family: After school enrichment, employment coaching, GED

  • Rent Increase

– Administrative Assistant recast as Service Coordinator

(Job Description)

  • Line 32 Rent adjustment
  • Review- The blogs about the property

– Address the issues

Market Below OCAF

HUDRentStudy.com

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SLIDE 29

$950 $1,000 $1,050 $1,100 $1,150 $1,200 $1,250 2010 2011 2012 2013 2014

Seattle Rent Trends

Market Rents OCAF Rents

Market Above OCAF

Year 2010 2011 2012 2013 2014 2011- 2014 Overall Rate State 2015 OCAF 4-YR US Average OCAF OCAF Projection: Above (Below) 4-YR Average Seattle Market $1,005 $1,035 $1,083 $1,147 $1,209 Year over Year Change 1.1% 2.9% 4.5% 5.6% 5.1% 20.3% MKT 4.5% OCAF 3.9% 2.7% 2.3% 2.4% 2.1% 9.8% OCAF 2.4% 2.2% 1.9% 4-YR Average Annual Rate

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SLIDE 30

$950 $1,000 $1,050 $1,100 $1,150 $1,200 $1,250 2010 2011 2012 2013 2014

Seattle Rent Trends

Market Rents OCAF Rents

Market Above OCAF

Year 2010 2011 2012 2013 2014 2011- 2014 Overall Rate State 2015 OCAF 4-YR US Average OCAF OCAF Projection: Above (Below) 4-YR Average Seattle Market $1,005 $1,035 $1,083 $1,147 $1,209 Year over Year Change 1.1% 2.9% 4.5% 5.6% 5.1% 20.3% MKT 4.5% OCAF 3.9% 2.7% 2.3% 2.4% 2.1% 9.8% OCAF 2.4% 2.2% 1.9% 4-YR Average Annual Rate

HUDRentStudy.com $126,000 Gain* * Assumes 100 units

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SLIDE 31

PROACTIVE

  • Re-invest

– Refinance

Market Above OCAF

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SLIDE 32

PROACTIVE

  • Re-invest

– Refinance

  • Reposition

– Renovate units/property

  • Kitchens, bathrooms
  • Washer/Dryer in unit
  • Community Room upgrades

Market Above OCAF

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SLIDE 33

PROACTIVE

  • Re-invest

– Refinance

  • Reposition

– Renovate units/property

  • Kitchens, bathrooms
  • Washer/Dryer in unit
  • Community Room upgrades
  • Rent Increase

– Renovation Date/Effective Date (Line 7 rent adjustment) – Washer/Dryer (Line 18 rent adjustment) – Community Room (Line 27 rent adjustment)

Market Above OCAF

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SLIDE 34

PROACTIVE

  • Re-invest

– Refinance

  • Reposition

– Renovate units/property

  • Kitchens, bathrooms
  • Washer/Dryer in unit
  • Community Room upgrades
  • Rent Increase

– Renovation Date/Effective Date (Line 7 rent adjustment) – Washer/Dryer (Line 18 rent adjustment) – Community Room (Line 27 rent adjustment)

  • Regress to the Mean

– High market rent increases will eventually level out to equal CPI

Market Above OCAF

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SLIDE 35

Financial Planning Tool

  • Are there storm clouds ahead in your

portfolio?

  • Is your ship ready to weather the storm?

Reposition your property accordingly Prepare your property today

HUDRentStudy.com

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