"We just closed and got our Notice to Proceed -- what does KHC actually require while we build, and what has to happen before our Form 8609s show up?"
KHC's own sequence from Notice to Proceed to the LURA/Form 8609 stage
A pre-construction conference is mandatory on every project, run by KHC's project review administrator and construction specialist together with the assigned project specialist, and it is not a formality: the developer, contractor, site superintendent, and architect (if applicable) are expected to attend, and the meeting works through the construction inspection schedule, the draw request and change-order processes, job- and site-safety fencing requirements, project signage requirements, Davis-Bacon wage rates if applicable, and the terms of the Notice to Proceed itself. Developers new to KHC's multifamily programs get a full conference; experienced developers may get a more limited version at KHC's discretion, held virtually, at KHC's offices, or on site.
KHC will not issue a Notice to Proceed until the pre-construction conference has been held, all pre-construction and pre-closing documents are received and approved, all applicable loan and equity closings have occurred, KHC's final underwriting is complete (with the final credit reservation letter sent for Housing Credit projects), and KHC's final project set-up has been reviewed and executed. Construction may not start before closing without KHC's prior written permission, and KHC's own Multifamily Guidelines state plainly that "[s]tarting construction early without KHC's permission will affect capacity scoring on future applications, incur a penalty fee, and result in withholding of KHC funds from the project." A narrow early-start exception exists (site control or ownership, an owner/contractor agreement, building permits, required insurance naming KHC as an additional insured, and an assurance-of-completion instrument), but it runs entirely at the owner/developer's own risk and independent of any KHC financing commitment, and federally funded deals must also have full environmental clearance first.
| Stage | KHC requirement | Deadline |
|---|---|---|
| Construction Completion/Placed-in-Service Stage | Submit only after KHC has issued a 100%-complete final inspection with no outstanding follow-up items | 60 days from KHC's approval of that final inspection |
| Land Use Restriction Agreement (LURA) and Form 8609 Stage | Submit the documentation required to obtain the LURA and IRS Form(s) 8609 | 120 days from submission of the Construction Completion/PIS stage |
| Calendar-year-end LURA/8609 issuance | All documentation, including PIS-stage approval, must already be in hand | November 1 (holiday-driven cutoff so KHC can finish before Thanksgiving/Christmas) |
| KHC's own LURA/8609 processing | LURA is drafted from submitted data and sent to the owner for signature and recording; original Form(s) 8609 are then mailed for both 4% and 9% credit on each building | "at least 30-60 days," per KHC's own Multifamily Guidelines |
Construction inspections and draws: KHC's own construction specialist, monthly, with a documented alternative for Housing-Credit-only deals
KHC's construction specialist makes regular visits to review progress and confirm the project conforms to KHC-approved plans and specifications, which must be kept on site during every inspection; visits occur at least monthly but may happen at any time. The notification duty sits with the owner, not KHC: the owner must call for inspection of all footers before pouring, of rough-in on every unit once mechanicals are installed and before drywall, and of project completion once units are ready for occupancy, and the owner must correct every issue and deficiency an inspection report identifies. For Housing-Credit-only projects (no HOME, NHTF, or Risk-Sharing funds), KHC's Multifamily Guidelines carve out one alternative: "KHC may require and accept an alternative inspection report for the three stages of construction performed on behalf of the investor or other lender" -- a substitution KHC controls, not one an owner can simply elect.
Draw mechanics are tightly rationed: KHC will disburse no more than 40% of a project's awarded KHC funds in the first draw, with every subsequent draw tied to the percentage of work actually completed as verified by KHC's monthly inspection; each project is limited to one draw request per month; and KHC retains 10% of all KHC funds until the final inspection is complete and every final document is approved. Contingency funds only move against an approved change order, and at the final draw KHC recaptures any unspent hard-cost contingency as a reduction against KHC's own award -- contingency dollars cannot be redirected to cover soft-cost overruns. Where KHC pays the developer fee directly, up to 40% is released up front and the remaining 60% follows the percentage of work completed.
| Total development cost | General requirements | Builder's overhead | Builder's profit |
|---|---|---|---|
| $250,000 and less | 6% | 7% | 12% |
| $251,000 - $750,000 | 5% | 6% | 8% |
| $751,000 and greater | 6% | 2% | 6% |
Each percentage is calculated against total hard cost minus contingency minus the other two fee categories, per KHC's Multifamily Guidelines formula. Construction contingency is separately capped at 5% of hard costs for new construction and 10% for rehabilitation (excluding acquisition), with a 3% minimum on any project also carrying a KHC loan.
Cost certification: owner and contractor both certify the whole development budget, under a standard this research could not fully verify
At the LURA/8609 stage, KHC requires "Final Cost Certifications (Owner and Contractor)": a cost certification of all development costs, including a cost breakdown by building and a sources-and-uses-of-funds statement, prepared by an independent Certified Public Accounting firm. Costs must be separated between land, syndication activities, and project depreciable costs, and construction hard costs must be based on a schedule of values in Construction Specifications Institute (CSI) format. The certification cannot predate KHC's 100%-complete final construction inspection and the Construction Completion/PIS-stage submission, and the owner must also key the same construction cost breakdown into KHC's UFA system. Kentucky's own text states directly that "[a]ll cost certifications must be prepared in accordance with KHC's Cost Certification Guidelines" -- a document this research could not independently locate to confirm what attestation level (a full audit, a review, or an agreed-upon-procedures engagement) the certifying CPA firm must actually deliver. Confirm the exact engagement standard directly with KHC's Construction Services staff before assuming a specific level, rather than defaulting to another state's practice.
Where a project also carries NHTF or Risk-Sharing funds, a parallel Final Cost Certification is due earlier and separately: NHTF regulations require KHC to receive it no later than 120 days from the date of the final draw. Housing Credit projects, by contrast, submit the equivalent document at the LURA/8609 stage instead -- meaning a deal layering Housing Credits with NHTF or Risk-Sharing money can face two different cost-certification submission points tied to two different triggering events, not one unified deadline.
Design and accessibility: a KHC-wide Universal Design mandate, plus federal layers that don't all trigger the same way
KHC's Multifamily Guidelines state flatly that "[u]niversal design is required for all new construction and adaptive reuse projects" -- a KHC program rule that applies regardless of which funding source is in the deal, layered on top of (not a substitute for) federal accessibility law. KHC's separate Minimum Design Standards (MDS) apply once KHC funding exceeds 10% of cost per unit, and automatically to new construction, reconstruction, and qualifying adaptive-reuse or rehabilitation projects funded with HOME, AHTF, SMAL, Risk-Sharing, Housing Tax Credits, or Tax-Exempt Bonds, except to the extent SHPO exempts a historic property. The MDS document itself lists the codes every project must meet: the current Kentucky Building Code, the MDS document, local planning/zoning and local authority rules, the Fair Housing Amendment Act of 1988 (for units first occupied on or after March 13, 1991), Section 504 of the Rehabilitation Act of 1973, the Americans with Disabilities Act of 1990, and HUD's NSPIRE physical-inspection standards -- and it requires final plans to state affirmatively which accessibility standards are reflected in the drawings.
The federal Section 504 unit-percentage requirement is narrower than it first appears. KHC's Multifamily Guidelines tie it to funding source: "[i]f a project is requesting HOME, NHTF, Risk-Sharing, or Project-Based Section 8 (when available), and has five or more units under one contract/deed, then 5% of the total units or more must be accessible to persons with mobility impairments and 2% of the units (minimum of one unit) must be accessible to persons with visual and/or hearing impairments in compliance with Universal Federal Accessibility Standards at 24 CFR 8.22" -- with a parallel 5%/2% rule for alterations to existing facilities of 15 or more units where the alteration cost reaches 75% or more of replacement cost. A Housing-Credit-only deal carrying none of those four funding sources does not trigger this specific UFAS percentage rule under KHC's own stated policy. That does not leave such a deal accessibility-free: the Fair Housing Amendment Act's own design-and-construction requirements for covered multifamily dwellings apply independent of funding source as a matter of federal civil-rights law, and the Kentucky Building Code's accessibility chapter applies to any new construction or substantial alteration regardless of funding. The three standards run on different triggers and shouldn't be treated as interchangeable.
No Kentucky prevailing-wage law since 2017 -- Davis-Bacon still attaches, but only through HOME
Kentucky repealed its own state prevailing-wage statute outright in 2017. House Bill 3, effective January 9, 2017 (2017 Ky. Acts ch. 3, per contemporaneous legal-industry reporting on the bill), repealed Kentucky's former prevailing-wage provisions and added a new state-law bar against local governments imposing their own prevailing-wage requirement in its place -- meaning Kentucky has had no state or local prevailing-wage law of any kind since early 2017. A 2024 attempt to reinstate a statewide prevailing-wage law, House Bill 508 (24RS), was referred to the House Committee on Committees on February 9, 2024, and never received a floor vote before the session adjourned; it did not become law, and this research found no successor bill that has passed since.
That leaves federal Davis-Bacon as the only wage floor that can attach to a Kentucky LIHTC deal, and KHC's own Multifamily Guidelines state the trigger precisely: "Davis-Bacon Act wage rate requirements apply to contracts for the development of 12 or more HOME-assisted units." A Housing-Credit-only deal, or a HOME-assisted deal with fewer than 12 HOME-assisted units, faces no prevailing-wage requirement of any kind under KHC's own stated policy. This research did not find an equivalent stated Davis-Bacon unit-count trigger tied specifically to NHTF or Risk-Sharing funding on their own (as opposed to HOME); confirm directly with KHC if a deal layers those sources instead of, or in addition to, HOME.
Getting to Form 8609: a whole-project sequence, and a one-award-at-a-time gate for developers new to Kentucky
KHC's own process only opens the LURA/8609 stage after the entire project clears a 100%-complete final inspection with no outstanding items and the resulting Construction Completion/PIS-stage submission is approved -- a sequence that functions as a whole-project gate rather than a building-by-building one. This research did not, however, find a sentence in KHC's public materials as explicit as some other states' agencies make on this exact point (a direct statement that 8609s will not be issued building-by-building); the whole-project reading here is an inference from the stage sequence, not a directly quoted KHC rule, so confirm directly with KHC's Multifamily Programs staff for any project phased across multiple certificates of occupancy. Owners of developments with more than one building must check "Yes" on line 8b of Form 8609 to treat all buildings as part of a single multiple-building project, and the income set-aside elected on Form 8609 Part II must match the election already reflected in the LURA.
A separate capacity gate ties a developer's next Kentucky award to this one's Form 8609 issuance date. KHC's Multifamily Guidelines state that "KHC limits new applicant/developers or applicant/developers new to Kentucky to one funded project for the current funding cycle," and that, absent KHC approval otherwise, "new applicant/developers will be limited to one outstanding award until the initial awarded project has achieved 100% construction completion and IRS Form(s) 8609 have been issued before a subsequent application may be submitted." That gate is separate from, and sits in addition to, the statewide $1,800,000 annual credit cap that applies once a developer clears it; a developer who has already placed a KHC Housing Credit project in service within the past three years is restricted only by the credit cap, not the one-award rule.
Where this goes wrong
- Assuming KHC's construction inspections are lender- or investor-driven the way some states structure it. KHC's own construction specialist inspects at least monthly and the owner bears the notification duty at footers, rough-in, and completion; only Housing-Credit-only projects may substitute an investor/lender's alternative inspection report, and only with KHC's agreement.
- Assuming the Final Cost Certification only has to cover the general contractor's hard costs. KHC's Chapter 10 checklist requires certifications of all development costs from both the Owner and the Contractor, broken out by land, syndication activity, and depreciable project cost.
- Treating "KHC's Cost Certification Guidelines" as reviewed and confirmed before assuming what attestation level (audit, review, or compilation) the certifying CPA firm must deliver. This research could not locate that standalone document; confirm directly with KHC Construction Services rather than assume another state's standard applies.
- Assuming the federal Section 504 5%/2% accessible-unit requirement applies to every KHC-funded new construction project. KHC's own Multifamily Guidelines tie it specifically to projects carrying HOME, NHTF, Risk-Sharing, or Project-Based Section 8 funding above a minimum unit count; a Housing-Credit-only deal is still bound by the Fair Housing Amendment Act's separate design-and-construction requirements and the Kentucky Building Code's accessibility chapter, but not this specific UFAS percentage rule.
- Assuming Universal Design is optional or funding-dependent. KHC's Multifamily Guidelines require it on all new construction and adaptive reuse projects regardless of funding source -- a KHC program rule layered on top of federal law, not derived from it.
- Assuming Kentucky has any state or local prevailing-wage requirement. The state law was repealed outright in 2017 (HB 3) and local governments are affirmatively barred from imposing their own; a 2024 bill to reinstate a state law (HB 508) died in committee and never passed.
- Assuming Davis-Bacon wage rates apply to every federally touched Kentucky LIHTC deal. KHC's stated trigger is specifically 12 or more HOME-assisted units; this research did not find an equivalent stated trigger tied to NHTF or Risk-Sharing unit counts standing alone.
- Starting construction before closing, or before the fully executed Notice to Proceed is returned, without KHC's prior written permission. Doing so affects capacity scoring on future applications, incurs a penalty fee, and can result in KHC withholding funds from the project, independent of whether the work itself was compliant.
- Assuming a developer new to Kentucky can pursue a second KHC-funded award while a first is still under construction. KHC limits new-to-Kentucky developers to one outstanding award until the first reaches 100% construction completion and Form(s) 8609 have been issued.
- Assuming Form 8609s are issued building-by-building as each is placed in service. KHC's own process only opens the LURA/8609 stage after the full project clears a 100%-complete final inspection and its Construction Completion/PIS stage is submitted and approved; this research infers a whole-project sequence from that process but did not find a KHC statement as explicit as some other states make on this exact point.
- HUD
- LIHTC
- State QAPs
- IRS § 42
- Housing Finance Agencies