Capital stack and soft money — Delaware

One agency runs almost the entire soft-money stack

The QAP's own Program Approval section states that the document governs DSHA allocations of LIHTC "pursuant to Section 42 of the Code and multifamily private activity tax-exempt bonds, the Housing Development Fund (‘HDF’), Housing Trust Fund (‘HTF’), and HOME Investment Partnership funds (‘HOME’) in conjunction with DSHA's LIHTC program." The Funding Supplement (part of DSHA's 2025-2026 LIHTC Guidelines) confirms the same point from the underwriting side: "DSHA administers a variety of state and federal affordable housing financial resources including, but not necessarily limited to, state Housing Development Funds (HDF), Affordable Rental Housing Program (ARHP) funds, and federal HOME and National Housing Trust Fund (NHTF) monies." HOME-ARP -- the American Rescue Plan-funded HOME set-aside -- is administered the same way, under DSHA's own HOME-ARP Allocation Plan. There is no separate state housing finance agency splitting HOME or NHTF away from the tax-credit shop the way some states structure it; a Delaware applicant's HOME loan, NHTF loan, and LIHTC allocation all come from the same Housing Development office.

Because DSHA controls all five of these programs, the QAP's Leveraging scoring category (Use of Resources, 0-10 points) defines "leveraging" as the opposite of DSHA money: "DSHA-controlled funds include: HDF, Affordable Rental Housing Preservation (ARHP), DSHA HOME, and NHTF" (the QAP's own text renders the ARHP acronym as "Affordable Rental Housing Preservation" here, inconsistent with the Funding Supplement's "Affordable Rental Housing Program" -- the same fund, two different expansions of the same acronym inside DSHA's own current documents). Everything else -- private conventional debt, USDA Rural Development debt, local municipality HOME funds, waived building-permit fees, tax abatement, Section 202, Federal Home Loan Bank funding, foundation grants, and donated land or subsidized land leases -- counts toward the Leveraging score. Existing project reserves, tax credit equity (including historic equity), and deferred developer fee are explicitly excluded from the leveraging calculation on either side of the ledger.

The rates and terms once a DSHA loan is actually on the table

The 1.00% deferred-interest rate on ARHP/HDF deferred permanent loans is not an underwriting convenience DSHA invented for this QAP cycle -- it traces to statute. Delaware Code Title 31, § 4036 (the ARHP-enabling section) states that "DSHA must provide interest credit to subsidize the interest on ARHP loans to a payment rate of 1%," and separately caps ARHP loan amortization at 50 years with a maximum 30-year term. The same statute defines the program's three income bands: "low-income" (50-80% of area median income), "moderate-income" (up to $5,500 above 80% AMI), and "very low-income" (below 50% AMI) -- bands that sit alongside, and are not identical to, the LIHTC program's own set-aside percentages.

DSHA's underwriting standards (Guidelines, Underwriting Guidelines) size how much hard debt can actually sit in the stack against a given rent roll: a minimum 1.15:1 debt service coverage ratio (DSC) applies where the loan-to-value ratio is 50% or less, rising to 1.20:1 DSC for a 51-80% loan-to-value ratio; projects with no amortizing debt at all must still maintain 1.10:1 DSC on operating income to operating expenses; FHA Risk Sharing deals follow the federal 1.176:1 ratio; and FHA 221(d)(4) loans use a 1.15 loan-to-value standard. "Value," the Guidelines specify, means Rent Restricted Value, not market value -- a materially more conservative sizing basis than an unrestricted appraisal would produce.

Deferred developer fee and the state basis boost as the last-resort gap-fillers

Delaware's own developer-fee caps set the ceiling on how much fee is even available to defer. For 9% competitive awards on developments up to 70 units, the fee is capped at the lesser of $1,000,000 or 15% of Total Development Costs (12% where there is an identity-of-interest acquisition, plus 5% of the acquisition cost); the cap rises to $1.15 million for 71-100 units and $1.3 million for 101 or more units. Deferred fee on a 9% deal cannot exceed 50% of the total calculated fee. For 4% tax-exempt bond deals the caps are larger ($2 million/$3 million/$4 million by the same unit tiers) but carry a distinct mechanic: 40% of the total fee (up to $800,000 on a small deal) must be structured as a "cash flow fee" paid only from operating cash flow, and of the remaining, non-cash-flow portion, deferred fee is capped at 50% again. The developer must submit a narrative demonstrating the cash flow fee plus any deferred fee can actually be repaid from distributions within the first 15 years of operation -- if it cannot, the developer must elect a smaller fee up front rather than assume a later restructuring.

Beyond deferred fee, an applicant using its own cash to close a funding gap must certify it holds "the amount of cash or other resources, as approved by DSHA, required to fill the funding gap," and if a developer-fee pledge is the mechanism, no more than 50% of the developer fee may be pledged that way -- language that sits on top of, not in place of, the deferral caps above.

Above the fee-and-cash layer, DSHA reserves "the exclusive right to award a state basis boost on eligible basis up to thirty percent (30%), as determined solely by DSHA," to applicants targeting special-needs or permanent-supportive-housing populations, family projects in Areas of Opportunity, or where needed to make a project financially feasible. This state boost is explicitly unavailable in a Qualified Census Tract or Difficult to Develop Area (which already carry the federal 30% boost) and is not available to tax-exempt bond applicants at all. The QAP is silent on whether this discretionary state boost can stack with the federal QCT/DDA boost outside of QCT/DDA sites -- this research found no QAP language addressing simultaneous federal-and-state boost stacking for a non-QCT/DDA Area-of-Opportunity site, so that interaction should be confirmed directly with DSHA underwriting rather than assumed either way.

The historic rehabilitation credit: real, generous on affordable units, and run by a different state office entirely

Delaware's Historic Preservation Tax Credit is not a DSHA program. It sits at 30 Del. C., Chapter 18, Subchapter II, and is administered by the Division of Historical and Cultural Affairs (the State Historic Preservation Office), not DSHA. The base rate under § 1813(a) is 20% of qualified rehabilitation expenditures for a property that is also eligible for the federal 20% historic rehabilitation credit, or 30% for a property that is not federal-credit-eligible (with a 100% rate reserved for resident curatorship properties, a narrow homeownership-adjacent category unlikely to apply to a rental LIHTC deal). Section 1813(f) then adds a specific affordable-housing bonus, quoted directly from the statute: “Whenever any part of the certified rehabilitation of a residential property is determined under regulations promulgated by the State Office to be committed to low-income housing, subsection (a) of this section shall be applied with respect to such part by substituting ‘30%’ for ‘20%’ and ‘40%’ for ‘30%.’” In plain terms: the portion of a rehab committed to low-income housing earns a flat 10-percentage-point bonus over the otherwise-applicable rate -- 30% instead of 20%, or 40% instead of 30%.

The credit is transferable -- § 1813(c) states plainly that "any person eligible for credits under this chapter may transfer, sell or assign any or all unused credits," with § 1814(a) requiring a certificate from the Division of Revenue or the Office of the State Bank Commissioner documenting the unused amount before a transfer. It is not refundable: unused credit is not paid out in cash, but under § 1813(d) it carries forward for up to 10 years. The whole program is capped statewide at $8,000,000 in new credit awards per year under § 1816(a), with internal set-asides inside that cap ($1.5 million reserved for projects claiming under $300,000 in credit, and a separate $1.5 million reserved for Downtown Development District projects) -- meaning a large LIHTC historic rehab competes against every other historic project in the state for a share of a single $8 million annual pool, not against other LIHTC deals specifically.

On the QAP side, DSHA's own Historic Housing scoring category (Use of Resources, 0-5 points) requires that every building in the development already be listed on the National Historic Register -- or, if inside a listed historic district, already certified as "contributing to the significance of the historic district" -- at the time of application, plus a letter from the State Historic Preservation Office confirming both building eligibility and that state credits "will be available by conversion." A development that is only pursuing historic designation, rather than already holding it, does not qualify for these points; partial eligibility (more than 50% but less than 100% of units) earns a reduced 2 points rather than the full 5.

Bond financing: DSHA is the only issuer, and the QAP contradicts its own front matter

Unlike states where multiple local or regional authorities can issue tax-exempt bonds for a 4% deal, Delaware's QAP and Funding Supplement both state flatly that "DSHA will be the bond issuer" -- there is no alternate local-issuer pathway described anywhere in this QAP. The Threshold Requirements section sets the aggregate-basis bond-financing band as both a floor and a ceiling in the same sentence: a tax-exempt bond property "will receive tax credits on the full amount of their eligible basis only if at least 30% of the development's aggregate basis is financed with tax-exempt bonds; notwithstanding the foregoing, an applicant cannot request more than 55% of the development's aggregate basis." The Funding Supplement restates the identical 30%-to-55% band. A tax-exempt bond deal must also score a minimum of 95 points and meet every other applicable threshold requirement -- non-competitive credit is not lower-bar credit.

This is where the QAP disagrees with itself. In its general Introduction, describing the federal 4% rate's history, the QAP states: "The One Big Beautiful Bill Act of 2025 changed the minimum bond financing requirement to 25%; DSHA has adopted updates to the minimum bond financing requirement effective with the 2026 application cycle." That sentence reads as though Delaware's own minimum dropped to 25% for the current cycle. But the operative Threshold Requirements language quoted above -- the actual eligibility rule an applicant is held to -- was not changed from the prior QAP cycle and still says 30% verbatim, as does the Funding Supplement's own Tax-Exempt Bond Financing section. This research could not reconcile that contradiction from the document's own text: an applicant relying on the Introduction's claim of a 25% minimum, rather than the 30% figure repeated twice in the QAP's operative sections, could materially undersize a bond financing plan. Confirm the currently enforced minimum directly with DSHA before sizing bond volume -- do not assume the Introduction's characterization controls over the Threshold Requirements' explicit 30% text.

Property tax relief: a live crisis, and a bill that had not become law as of this research

Delaware has no enacted, statewide property-tax exemption or payment-in-lieu-of-taxes (PILOT) program for LIHTC properties. Existing LIHTC developments are taxed as ordinary commercial property, and DSHA's own Appraisal definition anticipates that some individual projects may have negotiated a local abatement case-by-case: an appraisal must state "the most recent tax assessment of the property" regardless of whether the project received a tax abatement -- language that assumes abatements, where they exist, are individually negotiated rather than a standing statewide program.

That gap became acute in 2025-2026: New Castle County's 2025 property reassessment, combined with a 2024 statute (House Bill 242) that shifted additional tax burden onto commercial property to lower residential rates, produced sharp increases for LIHTC owners specifically because their properties are classified as commercial. Reporting identified at least one concrete example -- Evergreen Apartment Group's River Commons Apartments in Wilmington saw its property tax bill roughly triple -- and Delaware LIHTC operators broadly cannot offset a tax increase with higher rents, since their rents are restricted by the same program that produced the higher assessment in the first place.

Senate Bill 149, sponsored by Senator Russ Huxtable and recommended by Delaware's Affordable Housing Production Task Force, is the legislative response, and it is a framework, not a fixed rule: it would let an individual county or municipality choose to enact its own ordinance exempting LIHTC properties from ad valorem property tax (and, derivatively, from school district tax) in exchange for an annual payment in lieu of taxes. Sources disagree on the exact base of that payment -- program-recommendation coverage and Task Force materials describe it as "5% of the LIHTC's annual net income," while an extraction of the bill's own text describes the payment as "5% of the LIHTC property's annual revenue for the property's most recent fiscal year." Net income and revenue are not the same base, and this research could not confirm which formulation is the bill's actual operative language without a verbatim read of the enrolled bill text -- that distinction should be resolved against the bill itself, not assumed, before modeling PILOT savings for any specific deal. As of the most recent status this research could confirm, SB 149 had cleared its Senate committee ("Out of Committee," 5/21/2025) but had not passed the General Assembly; February and May 2026 reporting both describe it as still pending, with a Senate leader expressing hope for passage but no confirmed enactment found through the date of this research.

A separate package of property-tax bills moved through the House in June 2026 (including HB 461, HB 462, HB 463, and companion resolutions establishing property-assessment working groups) -- but those bills address the general residential-versus-non-residential tax-rate differential and reassessment cleanup in New Castle County broadly. They are not LIHTC-specific and should not be conflated with SB 149's targeted PILOT proposal; this research found no provision in that June 2026 package that reclassifies LIHTC or multifamily property out of the commercial tax category.