Memo to Members

HUD Urges PHAs to Take Cost-Saving Measures to Prevent Voucher Funding Shortfalls

Jan 20, 2026

By Alayna Calabro, NLIHC Senior Policy Analyst 

HUD sent a letter to public housing agency (PHA) executive directors on December 22 urging PHAs to take cost-saving measures to reduce Housing Choice Voucher (HCV) program costs and prevent funding shortfalls. In the letter, HUD discusses tools PHAs can use to help manage HCV program budgets and outlines recommendations for immediate cost-saving measures. Prior to this letter, HUD’s Office of Public and Indian Housing (PIH) issued Notice PIH 2025-28 on November 17 to outline options that PHAs can take to reduce housing assistance payment (HAP) expenses to prevent shortfalls.  

The letter recommends that all PHAs implement certain cost savings measures to avoid terminating assistance, including: 

  • Stopping the issuing of new vouchers (except for HUD-VASH participants and newly awarded Foster Youth to Independence vouchers); 

  • Pausing entering into new project-based voucher agreements and commitments (except for public housing repositioning efforts); 

  • Reducing payment standards, including stopping the use of any approved exception payment standards and remaining within the basic range except for reasonable accommodations as necessary; 

  • Assessing rent reasonableness policies and procedures to ensure compliance with statutory and regulatory requirements; and 

  • Adopting other cost-saving measures outlined in PIH Notice 2025-28. 

The letter states that HUD cannot guarantee that funding will be available to PHAs to resolve funding shortfalls. To help PHAs plan, the letter includes a PHA’s estimated 2026 inflation factor compared to its anticipated growth in program costs. HUD also encourages PHAs to use its two-year projection tool to project program costs and plan accordingly. 

HUD notes that PHAs that received shortfall awards in 2025 are considered to be at-risk of a funding shortfall in 2026 and must adhere to the Shortfall Prevention Team action plans. Adherence includes not issuing vouchers except under very limited circumstances permitted by the action plans. 

Read the 12/22/25 letter to PHA directors here. 

Read Notice PIH 2025-28 here. 

Related Content