HUD Publishes Public Housing Operating Fund Calculation Notice with Concerning New Provisions

Last week, HUD published PIH Notice 2026-21, “Public Housing Operating Subsidy Grant Eligibility Calculations and Processing for Calendar Year 2027.”

While the notice contains many of the usual provisions, it also includes several new provisions. These additions include the following changes.

• The notice says HUD has the right to “terminate, reduce, or limit the availability of a grant” for Operating Fund performance or substantial noncompliance. HUD considers factors outside of agency control to be a potential reason to take these actions.
• Operating subsidy recipients and their contractors are responsible for complying with all executive orders. It specifically names both future and existing executive orders.
• HUD claims the right to terminate all or part of an award for a series of reasons, including: grants “no longer effectuating program goals or agency priorities.” These actions could include a complete termination if a partial termination voids the initial purpose of funding.
• HUD has proposed a grant system that will apply to all grant recipients, named the HUD Unified Grant System (HUGS). This notice states that noncompliance with the reporting requirements for this future grant system will lead HUD to pursue remedies. This new system is not finalized, and NAHRO has submitted comments opposing this proposal. NAHRO has explained in these comments that this system will be burdensome and a duplication of existing requirements.
• Finally, HUD discusses the relationship between this notice and potential lawsuits. All provisions not specifically struck down by a judge will be considered by HUD to remain in place. However, what remains in place would depend on the decision of a court in any potential litigation.

The concerning certification language added for 2026 grants in Notice 2025-22 remains, which imposed requirements on agencies regarding immigration, gender, and other topics included in recent executive orders. Executive orders are generally written with federal agencies—not local entities—as their audience, and it remains unclear exactly how agencies should comply or what these orders mean for PHAs. The litigation from that notice, recent policy developments, and ongoing litigation will impact this year’s notice. NAHRO is aware and working to ensure agencies can continue serving their communities through this key source of affordable housing.

As with previous years, the notice provides an overview of the following:

• exemptions from asset management requirements, similar to prior years;
• an overview of initial eligibility estimates and eligibility calculations for funding in Calendar Year 2027;
• new Unique Entity Identifier requirements within SAM;
• information regarding the submission process, including project regrouping and clarification of which data PHAs can edit;
• detailed instructions for updating unit status;
• requirements for requesting a revision to operating subsidy eligibility in the Web Portal;
• a detailed explanation of operating subsidy grant calculations, including revisions to the Utilities Expense Level (UEL) factor;
• other requirements including environmental reviews, Moving to Work agreements, and General Depository Agreements;
• the appeals process based on appeal type, including information about the application of appeals to entire portfolios and instructions for the appeals process;
• program requirement for the Rental Assistance Demonstration, Turnkey III, and Envision Center participation;
• Faircloth limit guidance, including instructions for accounting for the limit on HUD Form 52723; and
• other general requirements.