LIHTC Operating Expense Benchmarks: Find the Cost That Deserves a Second Look

Start with comparable projects, not the biggest dataset

Before reading a benchmark, inspect the projects behind it. Geography, unit count, building systems, project age, resident population and the scope of services can all explain legitimate differences. A small family development and a larger supportive housing property may have very different staffing needs even in the same county.

In EZFeasi, the operating comparison uses available filed California CTCAC project data. Review the comparison set and the number of projects contributing to each line. A project that has no usable figure for a category should not quietly become a zero-cost observation.

These are figures from filed applications, not audited operating results or current contractor quotes. Their value is as evidence of how other sponsors underwrote a line. Keep the filing date visible when comparing a historical figure with a new budget.

Normalize the line before deciding it is high

Compare the same time period and unit basis. A yearly total, a yearly amount per unit and a monthly management fee cannot be compared directly. Also inspect where the expense is carried: trash collection inside utilities on one model and repairs on another can make both categories look misleading.

A benchmark does not replace a signed insurance quote, a staffing plan or a utility study. When better project-specific evidence exists, record the reason for the difference instead of forcing the budget toward the comparison set.

Use the median as a review prompt

A median is the middle of a set of comparable observations. It is useful for a first look because a single unusually large filing has less influence than it would on an arithmetic mean. It still cannot make an unsuitable set of projects comparable.

EZFeasi shows medians and sample counts where the available records support them. Supported operating-expense lines offer a Use action, with Undo available after adoption. Budget medians are comparison figures; they are not automatic replacements for your development costs.

Treat that action as a modeling choice. Before adopting a median, write down the operational change that would make it plausible: a revised management proposal, a corrected duplicate charge, a different procurement approach or an input error. If no explanation exists, keep the original figure while the team investigates.

Re-run the whole deal, not just the expense total

Suppose, purely as an illustration, a 100-unit project reduces a supported expense assumption by $100 per unit per year. The direct annual expense change is $10,000. Whether that creates additional debt capacity depends on the debt-sizing tests, interest rate and other financing constraints. It does not automatically mean the development can borrow $10,000 more or recover a fixed multiple of that amount.

The Ways to improve operations pane evaluates supported proposals through a full model re-run. It shows the effect on NOI, the permanent loan and, when a development budget exists, the funding gap. A proposal that newly fails the model’s applicable checks is held with a reason.

Review the combined result too. Separate changes that each look acceptable may interact when applied together. In particular, resident services, replacement reserves and contractual operating obligations are commitments to understand, not convenient lines to cut until the model balances. For a worked explanation of the debt constraint, see the LIHTC DSCR and debt-sizing example.

Turn a benchmark into an accountable decision

Keep a short decision note with the selected comparison set, the original figure, the proposed replacement, the evidence supporting it and the person who will confirm it. That makes the budget easier to explain to a lender or partner after the team has forgotten why the line moved.

Use the same discipline when the comparison points upward. A budget materially below peers may signal an omission or a scope difference worth resolving before closing. The purpose is a supportable operating plan, even when that makes the initial funding gap larger.

Explore EZFeasi’s cost comparison and operating engines and the EZOptimizer study of filed California applications, then bring a budget line to a walkthrough. We can show the comparison, the proposed change and the resulting underwriting together. For California requirements, use the applicable CTCAC regulations alongside the project’s lender and investor requirements.