Capital stack and soft money — Connecticut

Two agencies, one application, and a scoring table that excludes the state's own money

CHFA is designated the state's LIHTC housing credit agency under Chapter 134 of the Connecticut General Statutes and administers both the federal 9%/4% credit and Connecticut's own state Housing Tax Credit Contribution program. The Department of Housing is a separate cabinet agency that runs the state's own grant and loan programs -- FLEX, the Housing Trust Fund, and the federally funded HOME and National Housing Trust Fund allocations -- and the 2027 and 2028 QAP requires the two agencies to coordinate: Section II states plainly that "the Authority and the State of Connecticut Department of Housing (DOH) work closely to align the Plan with State housing policy," and the QAP's own Basic Threshold Requirement for a credible financing plan allows a pending DOH or CHFA financing source to satisfy the threshold with only "evidence of a pending application or pending request," not a signed commitment, at the time the LIHTC application is filed.

That coordination does not translate into scoring credit for bringing DOH money to the table. The New Construction Classification's 100-point scoring table has exactly one line for outside capital -- "Other Permanent Funding Sources," worth 3 of the Financial Efficiency & Sustainability category's 28 points, for a non-debt commitment exceeding 5% of Total Development Resources -- and the QAP's own text excludes the state's own money from qualifying for it: "State or state-administered funds, including but not limited to funding from DOH, Urban Act, Brownfields, the State Housing Tax Credit Contribution program, State Historic Tax Credits, the Municipal Redevelopment Authority and/or the Capital Region Development Authority are not eligible sources of permanent funding for purposes of qualifying for this Point." A developer building a pro forma on the assumption that a large DOH award will help the scoring table, rather than just closing a financing gap CHFA has already priced into how much credit it awards, is modeling a benefit the QAP explicitly withholds.

The practical relationship instead runs through underwriting, not scoring: Section III(B) of the QAP caps every 9% award at the amount CHFA "deems necessary for the development's financial feasibility," and a larger DOH soft-money layer generally means a smaller 9% ask, not a higher-scoring application. CHFA's June 2026 award round makes the scale of that layering concrete -- the six developments recommended for 9% credits that round were projected to draw approximately $144.9 million in private LIHTC equity alongside approximately $59.6 million in proposed DOH funding, according to CHFA's own award announcement.

DOH's own toolkit: FLEX, the Housing Trust Fund, HOME, and the National Housing Trust Fund

DOH's current developer-facing funding page names FLEX as "the State's primary flexible financing tool for developing affordable housing," separate from the state Housing Trust Fund, and both are layered on top of the federally funded HOME and National Housing Trust Fund (NHTF) programs DOH also administers. All four move through DOH's own Development Engagement Process (DEP), not CHFA's LIHTC application deadline -- the CHFA LIHTC Program Guideline (effective 11/1/2025) requires every LIHTC applicant to "indicat[e] their intent to submit an application for LIHTC by submitting a Preliminary Application... through the Development Engagement Process (DEP) by the date specified," published "on a bi-annual basis, generally in the spring and in the fall." A 4% or 9% LIHTC applicant that also wants DOH money has to track both the DEP window and the separate LIHTC filing deadline; a 9% LIHTC applicant that does not need DOH money still has to clear the DEP intent step, even though DOH's Fall 2025 DEP notice is explicit that "a specific Invite to Apply from DOH is not required for 9% candidates."

None of these four is a rubber stamp. DOH's own Fall 2025 DEP notice describes the process as "not a competitive funding round" but an early feasibility screen, with a formal application only invited after DOH and CHFA jointly review submitted materials, and it ties eligibility for DOH assistance to the separate statutory definition of "Affordable Housing" in Conn. Gen. Stat. §8-37pp -- a project has to qualify under that definition before it can be considered for DOH funds at all, independent of whether it also qualifies for LIHTC.

The Housing Tax Credit Contribution program: CHFA's own corporate-donation credit, and it needs a nonprofit in the deal

Conn. Gen. Stat. §8-395 creates a state tax credit voucher system that CHFA -- not DOH -- administers: business firms subject to the corporation business, insurance, air carrier, railroad, telecommunications/cable, or utility company taxes can make cash contributions to housing programs sponsored by a nonprofit corporation and receive a dollar-for-dollar tax credit voucher against those taxes. The statute caps the total at "ten million dollars in any one fiscal year," with "two million dollars" set aside for permanent supportive housing initiatives under §17a-485c and "one million dollars... set aside for workforce housing" every year until 60 days after CHFA publishes its list of reservations -- after which any unused set-aside money becomes available to the general pool. No single organization can receive more than "five hundred thousand dollars for any fiscal year," and CHFA's own HTCC Program Guidelines (Rev. 3/2024) tighten that further for a single Affordable Housing Development: no more than $500,000 per year, or $1.5 million in total, over three consecutive funding years.

The gating requirement most relevant to a LIHTC deal is who can apply: CHFA's HTCC Guidelines restrict eligible applicants to "a Nonprofit Corporation or a Community Development Financial Institution (CDFI)," and for a LIHTC project specifically, "the Nonprofit Corporation must be a part of the ownership structure of the partnership." A purely for-profit-sponsored LIHTC deal with no nonprofit co-general-partner cannot access HTCC funds directly, no matter how compelling the gap. Where a nonprofit is in the ownership structure, HTCC can be used as late-stage gap financing on a deal that already has a CHFA or DOH commitment -- the Guidelines treat a 9% Reservation Letter, or a firm tax-exempt bond commitment for a 4% deal, as sufficient evidence of a "firm commitment" to support a gap-financing request -- but not as a substitute for developer cash equity or an already-maxed deferred developer fee, and not for cost overruns caused by the applicant's own design or contracting errors.

HTCC funds move on their own annual clock, unconnected to CHFA's LIHTC deadline: a Notice of Funds Availability is published once a year, applications are submitted through the same CHFA/DOH Consolidated Application (ConApp) platform used for LIHTC and DOH funding, and awards are ranked on five factors -- Project Feasibility and Readiness to Proceed, Affordability, Applicant Capacity/Goals Accomplished, Livability Initiatives, and Compliance -- with a tentative reservation withdrawn if the nonprofit cannot line up a business-firm investor to actually buy the credit within 60 days of notice.

Property tax relief: a 2022 statute closed the charitable exemption, leaving a municipal-option abatement as the real tool

Connecticut's general charitable-purpose property tax exemption, Conn. Gen. Stat. §12-81(7)(A), exempts real property of a corporation "organized exclusively for scientific, educational, literary, historical or charitable purposes." A 2022 amendment (Public Act 22-73) added subdivision (7)(B), effective October 1, 2022, and it is direct: "housing subsidized, in whole or in part, by federal, state or local government and housing for persons or families of low and moderate income shall not constitute a charitable purpose under this section." A standard LIHTC-restricted rental property -- by definition income-restricted housing, and typically carrying some layer of federal, state, or local subsidy -- is exactly the category this carve-out removes. The statute preserves the exemption only for a narrow list of purpose-specific charitable housing uses: orphanages, drug or alcohol treatment/rehabilitation facilities, housing for homeless persons, persons with a mental health disorder, persons with an intellectual or physical disability, or victims of domestic violence, housing for ex-offenders or individuals in a Department of Correction or Judicial Branch program, and short-term charitable housing averaging under six months. A family or senior LIHTC development that does not fit one of those specific categories gets no benefit from a nonprofit general partner under §12-81(7) at all -- the general low-income-housing purpose itself is what the 2022 amendment excluded, regardless of ownership structure.

Where §8-215 is used, the mechanics are locally negotiated, not fixed by state formula. In Stamford's 2018 agreement for the 52-unit Lawnhill Terrace Phase 3 LIHTC deal (60% AMI, ground-leased from the Housing Authority of the City of Stamford d/b/a Charter Oak Communities), the city agreed to abate 100% of real property taxes on the LIHTC-restricted units for a 30-year term, in exchange for the partnership paying the city 10% of "Shelter Rent" (rent collected less owner-paid utilities) annually, plus 10% of net cash flow after deferred developer fees and loan repayments. That agreement explicitly anticipates that the state reimbursement under §8-216 may or may not materialize: "In the event that the City receives a PILOT Grant from the State of Connecticut for the Property, the parties shall negotiate an amendment to this Agreement establishing the distribution of PILOT funds to the respective parties" -- language that treats state reimbursement as a contingency to be worked out later, not a funding stream the deal was underwritten to receive. Section 8-216a separately requires that, once a §8-215 abatement is in place, the property be assessed for tax purposes based on the capitalized value of its net rental income (income less operating expenses and property taxes) rather than fair market value -- a materially different, and generally lower, valuation method that applies whether or not the state ever reimburses the town.