2026 Inflationary Adjustment
- Sharon Trischler
- Jan 2
- 3 min read
HUD’s 2026 Inflationary Adjustment: HOTMA vs. Non-HOTMA Explained
There has been growing confusion across the affordable housing industry about HUD’s inflationary adjustments. The big question many property owners and managers are asking is simple:
Do I need to use the HUD inflationary adjustment … or not?
The answer is: it depends — specifically on whether your property is HOTMA compliant or still operating under pre-HOTMA rules.
Let’s break it down.
Why HOTMA Matters
The Housing Opportunity Through Modernization Act (HOTMA) fundamentally changes how income and assets are calculated for HUD-assisted properties. HUD has allowed properties to implement based on their HOTMA implementation, meaning not all properties are operating under HOTMA rules yet.
Because of this, two sets of standards currently exist:
Non-HOTMA (legacy) rules
HOTMA-implemented rules (NOTE: all RD Properties are required to be HOTMA compliant and should be using the new rates).
This is where the confusion around inflationary adjustments begins. Many agencies believe that because the inflationary rate changes annually, that HOTMA implementation should not matter. However, others believe that since the new rates were initially released with the original implantation notice, that the new rates are only required once HOTMA has been implemented. Guidance has been released that does allow properties who have not implemented HOTMA to continue to use the old rates.
If Your Property Is Not HOTMA Compliant
If you have not yet implemented HOTMA, many of the familiar figures remain unchanged, even in 2026.
Under non-HOTMA rules:
Passbook rate remains at 0.06%
Asset income is imputed when total assets exceed $5,000
Maximum income for verified full-time students remains $480
So for non-HOTMA properties, the “inflationary adjustment” does not result in new calculations. Business continues as usual.
NOTE: HUD delayed implantation until 2027 and therefore, HUD properties are not using the new rates.
If Your Property Is HOTMA Compliant
If you have implemented HOTMA, you must follow the updated standards — and this is where the real changes take effect.
Under HOTMA rules:
Passbook rate increases to 0.40%
Imputed income applies only to individual assets exceeding $52,787, and only when the actual income earned cannot be determined
Maximum income for verified full-time students increases to $500
These changes reflect HUD’s effort to modernize asset calculations and align income thresholds more closely with today’s economic realities.
So… Did the Inflationary Adjustment Go Up?
✔ Yes — for HOTMA-compliant properties
✖ No — for properties still operating under pre-HOTMA rules
The key takeaway is that HUD’s inflationary adjustments are not universal in 2026. Your compliance status determines which rules apply.
Final Thoughts
HOTMA directly impacts how income, assets, and student eligibility are calculated. Applying the wrong standards can result in compliance findings and/or repayment issues. Because implementation requirements may vary, it is critical to understand which rules apply to your specific property.
If you are unsure of the current requirements, be sure to reach out to your state agencies, as state agencies may have different implementation timelines or guidance. When in doubt, you should always contact your Housing Finance Agency (HFA) to ensure you are applying the correct standards.
Staying informed and verifying requirements before applying changes can help protect your property, your residents, and your compliance standing.
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