Building the capital stack and closing the gap — Alabama

What actually happens, and why one agency runs the whole stack

The same three workstreams run in Alabama as everywhere else — structuring, soft-money assembly, and debt-and-equity procurement — moving in parallel from roughly site control through construction loan closing. What differs is who is on the other end of every call: in Alabama it is very often the same person. The Alabama Housing Finance Authority (AHFA) is simultaneously the state's Section 42 Housing Credit allocator, its HOME and National Housing Trust Fund (NHTF) lender, and its tax-exempt multifamily bond issuer, operating under one 2026 Qualified Allocation Plan (QAP) — adopted June 12, 2025 — with two governing addenda. AHFA has held this role, and written the state's affordable-housing strategy, since the HOME program began; its own QAP still notes the State's 17% poverty rate ranks 47th among the 50 states.

AHFA's consolidation cuts against the deal in one respect and for it in another. There is no second agency layering an independent cap on top of AHFA's own numbers — one QAP, one set of fee caps, one DSCR test, for both the credit application and the soft-money loan. But it also means AHFA's own internal priorities decide almost everything, starting with geography: AHFA states plainly that it 'will achieve this priority by allocating Housing Credits and HOME Funds generally to only one project per county.' The scarce resource in Alabama is not eligible basis or bond-cap headroom — it is the county slot.

The county slot is the scarce resource

Inside a county, AHFA runs a scored competition; across counties, it runs a rationing rule. Addendum A's Project Selection Procedures fund, in order: the highest-scoring project per county with an AHFA-Approved CHDO owner (until the federal 15% CHDO set-aside is met); then the highest-scoring Housing Credit project statewide regardless of location, so long as it doesn't worsen concentration; then, to use up available HOME Funds, at least two of the highest-scoring Housing-Credit-plus-HOME projects per county; and finally the highest-scoring project (or HOME-combined project) per county until funds run out. Two projects can share a county only under a narrow exception involving an existing, substantially-occupied, HOME-repaid AHFA project. Lose the county to a higher scorer and there is no partial award — you wait for the next annual cycle.

Score is the entry ticket, not the finish line. A project with a net score — Points Gained less Points Lost — below 70 is not considered at all, out of a maximum 104 possible Points Gained (84 for Project Characteristics, 20 for Applicant Characteristics). Points Lost has no maximum: 5 points for each occurrence of altering an approved AHFA project without consent or an uncured compliance failure anywhere in the Responsible Owner's or management company's AHFA portfolio, 2 points per unresolved Davis-Bacon issue. A messy property 200 miles away, in a county you aren't even applying in this year, can push this year's application below the 70-point floor.

AHFA also won't consider a new-construction application, or a rehab application on a site less than 50% occupied, if it sits within a 2-mile radius (measured site-centroid to site-centroid on GIS) of any other AHFA-approved project from a prior cycle that hasn't yet reached 90% occupancy or placed in service — with exceptions for RAD/Choice Neighborhoods deals, PHA replacement housing, and bond-financed acquisition/rehab of a pool of three or more properties, among others. This is a threshold gate, not a scoring deduction: fail it and the application isn't evaluated at all.

Bonds and the Workforce Housing Credit: first in line beats highest score

Multifamily Housing Revenue Bonds are the one AHFA product that isn't scored at all. Any applicant financing a project through the bond program is 'exempt from the Point Scoring Process.' Bond applications are processed on a first-come, first-served and first-closed, first-served basis: a complete application that's ready to close beats a better project that isn't, and bond cap 'is not reserved' for anyone still in the queue.

Alabama's own state credit is new, small, and deliberately tied to the bond track. The Alabama Workforce Housing Tax Credit Act (Act No. 2024-302, signed May 9, 2024; codified at Code of Alabama §§ 40-18-530 through 40-18-535) creates a dollar-for-dollar state tax credit for qualified workforce-housing investment, administered by AHFA through an eligibility-certificate process. AHFA's own January 2026 bond-program materials put the entire program at $5,000,000 in credits per year, statewide, against a uniform $2,000,000 per-project cap — with 20–25% of that annual pool (roughly $1,000,000–$1,250,000) set aside for projects in designated rural Workforce Preference Areas, not a lower per-project ceiling for rural deals. At that ratio, the program can fund at most two or three full-size awards in a given year.

Federal capacity is not Alabama's constraint the way state credit competition is California's. The 2026 per-capita multiplier that sets every state's 9% credit ceiling is $3.416 per resident (or a $3,953,600 floor for small states), and the private-activity-bond volume-cap multiplier is $135 per resident (or a $397,625,000 floor) — both set annually under IRC §§ 42(h)(3)(C)(ii) and 146(d). Applied to the Census Bureau's vintage-2024 Alabama population estimate of 5,157,699, that computes to roughly $17.6 million of 9% credit authority and roughly $696 million of total state bond-cap authority for 2026 — figures this pass computed from the federal formula, not an AHFA-published ceiling, which was not located in the sources reviewed. And unlike California's CDLAC apportionments or Texas's issuer-split bond pools, nothing in AHFA's public materials describes a dedicated housing set-aside carved out of Alabama's overall bond-cap ceiling — confirm the actual multifamily share directly with AHFA before assuming supply.

One underwriting rulebook — fee caps, DSCR, reserves

The fee definition is broad by design — it includes 'the developer's overhead and profit plus consultant fees and the Ownership Entity's profit' — so consultant contracts and syndicator-facing fees that might sit outside the cap elsewhere in the country need to be tested against it here.

Two caps limit how much of AHFA's own program any one player can absorb: no project may receive more than 15% of the state's current Housing Credit Ceiling, and no Responsible Owner or its Related Parties — regardless of ownership percentage — may be allocated more than 15% of that ceiling or more than 25% of the state's current HOME Fund allocation in aggregate, with the full HOME award counting against the cap even at a fractional ownership stake.

The Alabama soft-money map: HOME, HTF, and Rural Development

AHFA's own soft money comes in two federal pass-throughs — HOME and the National Housing Trust Fund — plus the Workforce Housing Tax Credit covered above. Both federal programs run on AHFA's own fiscal-year numbers, published fresh each cycle rather than a multi-year pipeline.

Geography gates HOME before underwriting ever starts. Alabama itself is the HUD Participating Jurisdiction (PJ) for the state's HOME allocation — but eight local governments are their own PJs with their own direct HUD allocations: Anniston, Birmingham, Huntsville, Jefferson County, Mobile, Mobile County, Montgomery, and Tuscaloosa. AHFA 'will not accept or consider' a general-cycle HOME application sited in any of those eight, full stop. The only carve-out is an AHFA-approved CHDO or non-profit combining HOME with Housing Credits in the competitive cycle, and even then it needs a signed Certification of Consistency with that jurisdiction's own Consolidated Plan.

The rule flips on the separate, non-competitive HOME-plus-Bond track. Applications combining HOME Funds with Multifamily Housing Revenue Bonds are taken first-come, first-served, due by 5:00 p.m. on September 1 each year (September 1, 2026 for the current cycle) — but eligibility runs the opposite direction: acceptable projects must sit in a city or county that is a HUD-approved PJ receiving its own HOME allocation, must have more than 56 units, and combined bond-paired HOME awards in a year can't exceed 50% of AHFA's annual HOME allocation. A tool that applies the general-cycle PJ exclusion to this track will screen out the exact deals it's meant for.

USDA Rural Development (RD) threads through nearly every provision above, because a large share of Alabama's existing affordable stock is RD 515 rural rental housing coming up for recapitalization. That is why the QAP carves out a lower 1.05:1 DSCR and a lower 8% acquisition-fee cap specifically for RD-financed deals, why RD 515 transfer/assumption letters earn up to 3 dedicated Rent Affordability points, and why a rehab that repays or extends an existing AHFA HOME loan (a separate, non-RD provision) can be worth up to 10 Project Type points. Model RD financing as its own track with its own thresholds, not as a HUD-adjacent variant of everything else.

The calendar, the exit, and the inputs nobody can source

AHFA's own contractual minimum runs longer than the federal floor: every project commits in writing not to request a Qualified Contract 'until after the end of the 19th year of the Extended Use Period' — four years past the 15-year federal compliance period. A separate, purely voluntary commitment to waive Qualified Contract rights entirely and remain affordable through the full 30-year Extended Use Period is worth 3 scoring points. What this pass could not independently verify is the actual QC pricing mechanics AHFA would apply after year 19 — the formula, and any AHFA-specific procedural conditions layered on top of the federal minimum. Treat the mechanism as real and contractually binding, and its year-19 pricing as still to be confirmed before quoting a number to a client.

Two inputs stay outside AHFA's own published rulebook the same way they do everywhere else. Housing Credit equity pricing is not published by AHFA at all — it comes from syndicator term sheets and the same paywalled national pricing series every other state relies on, and it belongs in the model as a range, not a constant. Operating expenses are the reverse problem: rather than a fixed minimums table that can go stale, AHFA underwrites each cycle against 'historic and current Housing Credit properties' financial statements' — current by design, but not a number a developer can look up before applying.

None of AHFA's soft-money or bond tracks run on a multi-year published calendar. The Housing Credit/HOME cycle, the NHTF cycle, the WHTC Notice of Intent window, and the bond program's non-competitive window all reopen annually on AHFA's own schedule, and each can move. Watch AHFA's Multifamily Notices page rather than planning off last year's dates.