HUD Recommends PHAs Cease Issuing New Vouchers
By: Tushar Gurjal, Senior Policy Manager
December 23, 2025 — On December 22, HUD sent a letter (as an email) to PHA executive directors emphasizing the need to prudently manage the Housing Choice Voucher (HCV) program budget in 2026. In the letter, HUD discusses why PHAs need to take cost-saving measures, tools and guidance that HUD has to help with cost-savings, suggestions on immediate cost-saving measures (including not issuing most new vouchers, but excluding HUD-VASH and newly awarded Foster Youth to Independence [FYI] vouchers), a note about PHAs that have already received shortfall funding, and, finally, an appendix showing a PHA’s anticipated inflation factor and its anticipated cost increases.
The Department states that PHAs must take cost-savings measures to reduce HCV program costs so they do not exceed funding in the coming year. It states that while rental inflation has been high in the past, it has moderated recently, but PHA program costs are not reflecting this moderation in rental inflation. (NAHRO notes that another explanation for this behavior may be that inflation factors are not adequately capturing on-the-ground rental inflation.) To avoid having costs that exceed anticipated funding, PHAs should reduce program costs now. Interestingly, the letter states that housing agencies “. . . should . . . not rely on excess HAP reserves to fund [their] program[s].”
There are certain tools and guidance that can be helpful in reducing program costs. First, the letter includes an appendix that shows the recipient’s inflation factor compared to its anticipated growth in program costs. If the latter exceeds the former, then cost-cutting measures are essential. Second, the letter encourages PHAs to use HUD’s two-year projection tool to properly project its costs and plan its program accordingly. Third, housing agencies should consult Notice PIH 2025-28 for a full list of cost-savings measures. Fourth, PHAs may request technical assistance from HUD (email shortfallinquiries@hud.gov).
In addition to referencing Notice PIH 2025-28, the letter also specifies certain cost-saving measures it recommends to all PHAs:
- Stop issuing new vouchers (except HUD-VASH and new FYI vouchers);
- Pause entering into new project-based voucher agreements (except for the repositioning of Public Housing);
- Reduce payment standards (including approved exception payment standards) and stay within the basic range (unless for a reasonable accommodation);
- Ensure proper rent reasonableness procedures are being followed; and
- Adopt other cost savings measures in Notice PIH 2025-28.
Housing agencies that received shortfall funding in 2025 must continue to adhere to their Shortfall Prevent Team (SPT) action plans. These agencies must not issue new vouchers, except as stated in the plan.
The letter also discusses potential shortfall awards. It notes that “. . . HUD cannot guarantee that funding will be available to [a] PHA to resolve any shortfall.” Additionally, the letter also states that HUD is considering a policy of taking into account prior shortfall awards in “. . . determining eligibility, prioritization, and/or the amount of any 2026 shortfall award.”
The appendix of the letter shows the recipient’s inflation factor and projected annualized cost increase. If the latter exceeds the former, then the housing agency should immediately work to bring costs down.
As NAHRO understands this letter, even if Congress fully funds the HCV program (i.e., gives enough funding to cover the costs from vouchers being leased in 2025 plus the anticipated inflation factor), it will still not fully cover the anticipated 2026 costs for many housing agencies. If Congress underfunds the program such that a proration for the Housing Assistance Payment (HAP) account (i.e., the account used to pay rent in the program) is required, this will exacerbate the situation. In even the best-case scenarios, there will likely be a scarcity of funds, so PHAs should start taking cost-savings measures.
The full letter can be found here.