"What does it cost, and whose number does AHFA actually use?"
Three feasibility checks, and no published cost table
Cost review in Alabama does not run through a published limit or a scored formula the way it does in California or Texas. It runs through the Alabama Housing Finance Authority's own discretionary judgment, redetermined at three specific points in the deal's life. AHFA states this directly: it "will make this determination 3 times: (a) at the time of application (b) upon review of the 10% Test and (c) at Actual Cost Certification." What AHFA never publishes in advance is the standard it applies at any of the three.
| Pass | AHFA section | What actually happens |
|---|---|---|
| Application | II.E(1) — Process of Evaluation | Completeness, point scoring and financial feasibility are reviewed together; project costs are checked against AHFA's own 'hard and soft cost standards' and the Design Quality Standards and Construction Manual — neither publishes a per-unit or per-square-foot ceiling |
| 10% Test / Carryover | II.E(2) — Carryover Allocation Agreement | A Carryover Certificate must show 10% of reasonably expected basis has been expended; AHFA reserves the right to require certification of any line-item cost included in that expected basis |
| Actual Cost Certification | II.E(3) | A CPA-audited final cost report at placed-in-service; AHFA reconciles fee caps and Eligible Basis against it and will not issue IRS Form 8609 until every issue is resolved — Alabama's true-up, functionally the same moment as CTCAC's placed-in-service retest, but with no published limit to retest against |
AHFA describes its own reasonableness standard as a moving target, reset every cycle: it "determines reasonableness of project costs by comparing aggregate cost data based on all applications received, historical cost certification, cost data of completed projects, and current cost data provided by AHFA third-party construction consultant reports. After evaluating all the data, reasonable standard project hard construction costs and soft costs are established for each application cycle." None of that aggregate data is published. A developer cannot look up the number the way a California developer reads a CTCAC memo or a Texas developer checks a QAP table — the comparison set exists only inside AHFA between application cycles.
AHFA also does not simply fund what is requested. It allocates credits at "the lesser of the amount requested by applicant or the Housing Credit amount that is determined by AHFA to be necessary" for feasibility, and says plainly it "cannot and should not be expected to fund the full amount requested by an applicant, especially in those cases where an applicant proposes to complete a higher-than-normal cost development which far exceeds AHFA minimum Design Quality Standards." A high-cost application isn't rejected outright the way a CTCAC high-cost breach is — it is expected to bring outside subsidy: "Special purpose or high-cost housing applications that exceed construction and soft costs of other applications received must be supported with other subsidy sources."
A separate feasibility check runs alongside cost: AHFA requires a minimum Debt Service Coverage Ratio of 1.20:1 for Housing Credit debt financing, relaxed to 1.05:1 for Rural Development-financed debt or any non-AHFA HUD-financed debt.
Who is actually in the room looks like California and Texas — developer project manager, architect, GC preconstruction or third-party estimator, LIHTC consultant — with one gap worth naming: unlike TDHCA, which names the Marshall & Swift Residential Cost Handbook as its underwriters' benchmark, AHFA's QAP does not identify any specific national cost index or handbook its reviewers or third-party consultants benchmark against. It cites only its own unpublished aggregate history.
Developer, builder and syndication fees — the caps that exist, and the one that doesn't
Two real fee caps exist, and both are pure percentages with no absolute dollar ceiling — closer to Texas's structure than California's, where CTCAC pairs a percentage with a hard dollar cap ($2.5 million, rising to $2.8 million for a qualifying Special Needs restriction).
| Fee | Cap |
|---|---|
| Developer Fee — new construction & rehabilitation | ≤15% of total project costs, excluding the developer fee itself (includes developer overhead and profit, consultant fees, and the Ownership Entity's profit) |
| Developer Fee — acquisition | ≤15% of total acquisition cost; capped at 8% of acquisition cost specifically on Rural Development projects |
| Builder Fee | Should not exceed 8% of construction costs, excluding the fee (builder profit and overhead) |
| General Requirements | Must be cost-certified and, "as a general rule," should not exceed 6% of total construction costs — a stated guideline rather than a hard cap, held "consistent with HUD and USDA Rural Development regulations" |
There is no Alabama counterpart to CTCAC's syndication expense cap (10% private / 20% public offerings, with Executive Director discretion to 15%/24%). AHFA's QAP does not publish any percentage limit on syndication costs at all — the only syndication-related trigger in the document is a negative-action flag for an undisclosed change in syndication structure or in how funds are distributed through syndication, not a cost ceiling.
| Cap | Detail | Section |
|---|---|---|
| Minimum rehabilitation cost per unit | $20,000 of hard construction cost per qualified Housing Credit unit for projects not previously funded by AHFA; $12,500/unit for projects previously allocated by AHFA — certified by a Capital Needs Assessment submitted with the application, or the application terminates at threshold | II.C(11) |
| Housing Credit Cap | No single project may receive more than 15% of the state's current Housing Credit Ceiling under IRC §42(h)(3); no Ownership Entity, Responsible Owner, or Related Party may receive more than 15% across all their projects in a cycle, counted at 100% of each project's allocation regardless of ownership percentage | II.G |
| HOME Fund Cap | No Ownership Entity, Responsible Owner or Related Party may be allocated HOME Funds in excess of 25% of the state's current HOME allocation | II.G |
| Minimum DSCR | 1.20:1 generally; 1.05:1 for Rural Development-financed or non-AHFA HUD-financed debt | II.E(1)(iii) |
None of these four is a cost-per-unit or cost-per-square-foot ceiling. They cap fees, minimum spend, and concentration — not the building's price.
Construction type, minimum standards, and where the real cost drivers hide
Alabama has no single statewide building code the way California's CBC or even Texas's 2012-floor municipal code exists. AHFA's own Design Quality Standards and Construction Manual assumes and requires local variation: projects must follow the "current locally adopted International Building Code or International Residential Code at the time construction is permitted along with any more restrictive local building codes or ordinances." Where no local building department exists, AHFA sets its own floor: "design and construction must be in accordance with the IBC or IRC dating no farther back than 2009."
AHFA overlays a stricter, statewide-uniform energy standard on top of whatever the locality has adopted: "Regardless of locally adopted codes, all new construction projects are subject to the 2021 IECC with no exceptions except as stipulated within the code. Additionally, buildings 4 stories or more in height must also meet ASHRAE 90.1-2019." That is materially newer than Alabama's own general-purpose state energy floor — per the U.S. Department of Energy's Building Energy Codes Program tracker, the state's baseline residential code (administered through the Alabama Department of Economic and Community Affairs' Energy Division) runs on the 2015 IECC, and the baseline commercial code on ASHRAE 90.1-2013 — so an AHFA-funded building is held to a newer, more expensive energy standard than a non-LIHTC building permitted under the state's own general floor.
| Unit type | Bathrooms | Unit net area (SF) | Bedroom net area (SF) |
|---|---|---|---|
| 1 Bedroom | 1 | 725 | 120 |
| 2 Bedroom | 1 | 900 | 120 |
| 2 Bedroom | 1.5 | 925 | 120 |
| 2 Bedroom | 2 | 975 | 120 |
| 4 Bedroom | 2 | 1,455 | 120 |
Rehabilitation of an existing building (12+ units, DQS Section V.A) runs smaller: 600 SF (1BR), 775 SF (2BR), 1,000 SF (3BR), with no individual bedroom under 90 SF.
Elderly projects carry their own story-count rule, and it isn't free: "All 100% Elderly projects must be one-story structures. Exception: Projects may have more than one story, provided elevators are to be installed to service all upper-level apartments. Design exceptions, or deviations, must be reviewed by AHFA on an individual basis." There is no CTCAC-style basis bump attached to clearing this — it is a threshold design decision reviewed case by case, and the elevator cost is entirely the developer's to absorb.
The real construction-type cost lever hiding in the point-scoring sheet is masonry, not story count. New construction projects can earn 4 of a maximum 8 points for "full brick/cementitious siding, stucco, cultured stone, or concrete masonry unit (CMU) products (No Exterior Insulation Finishing System is acceptable)" — with the other 4 points tied to storm windows and insulated exterior doors. Multifamily buildings need a minimum of 40% brick across the finished-grade-to-eave façade, with the remaining 60% cementitious siding, stucco, or decorative CMU; single-family detached units need 50% brick. This is a real, scored material-cost decision that applies regardless of construction type or story count — the nearest Alabama analog to CTCAC's Type I/III basis bump, except it moves competitive points rather than eligible basis.
A narrower but easy-to-miss basis rule: AHFA caps the clubhouse or community building space eligible for Eligible Basis at 3,000 heated-and-cooled square feet. A larger amenity space is allowed, but "any square footage exceeding this amount will not be included in the Eligible Basis used to calculate the Housing Credit" — a real basis-shrinkage rule for a program amenity a developer's own market study may want bigger.
AHFA's manual explicitly contemplates modular construction: units "constructed in component sections and assembled by a manufacturer in a controlled environment," then set on a permanent foundation and finished on site, "constructed to meet applicable building codes, AHFA's specifications and Design Quality Standards," with a manufacturer's warranty required. There is no basis adjustment and no cost-cap relief for building modular — and as in California and Texas, no credible Alabama-specific study of modular cost savings was located. Treat vendor claims as marketing, not underwriting input.
The labor package: why prevailing wage almost never touches an Alabama deal — until AHFA's own money brings it back
Alabama's prevailing-wage exposure isn't narrow the way Texas's is — it doesn't exist at the state level. The U.S. Department of Labor lists Alabama among 24 states with no state prevailing wage law, noting it was "repealed in 1980." Alabama also has no state minimum wage law of any kind; the federal $7.25-per-hour floor applies statewide. There is no state statute to research here the way there is Texas Government Code Chapter 2258 — nothing sits on the books to analyze.
That does not make labor standards irrelevant. Federal Davis-Bacon is portable across every state and still governs whenever a specific federal funding source is actually layered into the deal.
| Program | Trigger |
|---|---|
| LIHTC alone | None — it is a tax credit, not direct federal financial assistance |
| HOME | 12 or more HOME-assisted units (24 CFR §92.354) |
| CDBG | Rehabilitation of residential property with 8 or more units |
| Project-based Section 8 | New construction or substantial rehab at 9 or more assisted units, agreement executed before construction begins |
| Public Housing (1937 Act) | No unit threshold |
| NAHASDA | No unit threshold; $2,000 contract threshold |
| National Housing Trust Fund | Not triggered — HUD's own program guidance under 24 CFR Part 93 does not apply Davis-Bacon labor standards to NHTF |
The practical difference in Alabama is structural: AHFA is itself the state's HOME participating jurisdiction, and its own QAP routinely combines a HOME loan with a Housing Credit allocation on the same project — the Housing Credit Cap section sets a separate 25%-of-allocation HOME Fund Cap in the same breath as the credit cap. That means the "does this deal have a federal trigger" question is frequently AHFA's own capital-stack decision, not a separate city or county funding choice layered in from outside. A developer accepting an AHFA HOME second mortgage alongside Housing Credits should assume the 12-or-more-HOME-assisted-unit Davis-Bacon threshold is live and price it before the budget is locked.
AHFA's own compliance-scoring addendum treats Davis-Bacon as an ongoing exposure, not a one-time federal clearance event. Its Point Scoring System deducts "2 points (for each occurrence)" from an application if any Responsible Owner or Management Company, "with respect to Davis Bacon requirements on any AHFA-Project (approved and/or Placed-In-Service)," has outstanding issues unresolved 6 months after GC notification, missing required wage-decision postings, a GC unable to submit payrolls (forcing an escrow account), issues outstanding more than 2 years, or a missed Section 3 Summary Report or HUD-2516 Report deadline. Because the penalty attaches to "any AHFA-Project," a Davis-Bacon compliance failure on one AHFA-funded deal can cost a developer points on a completely different, later application — turning Davis-Bacon into a portfolio-level exposure for a repeat AHFA developer, not a project-by-project one.
What the benchmarks support, and what they don't
Alabama has no equivalent to CTCAC's threshold basis limit table or TDHCA's Cost of Development per Square Foot scoring schedule. There is no public number to benchmark a project against before submitting — AHFA's "reasonableness" standard is reset every cycle from aggregate application and cost-certification data that AHFA does not publish.
The nearest independent national benchmark is GAO's 2018 review of LIHTC development costs, which sampled 12 selected allocating agencies — 10 states and 2 cities: Arizona, California, Chicago, Florida, Georgia, Illinois, New York, New York City, Ohio, Pennsylvania, Texas, and Washington — for projects completed 2011–2015, and found median per-unit new-construction costs ranging from about $126,000 in Texas to about $326,000 in California. Alabama was not among the 12 agencies GAO examined, so even the best available federal cross-state dataset has no Alabama figure in it. That is an honest data gap, not an oversight in this guide — do not substitute a neighboring state's number for a missing Alabama one.
No Alabama-specific econometric study of a prevailing-wage cost premium exists, for the same structural reason Texas has none: without a state law creating a real population of prevailing-wage versus non-prevailing-wage Alabama LIHTC deals to compare, there is no natural experiment to study. Any prevailing-wage premium built into an Alabama pro forma should come from the specific federal trigger actually present in that deal's capital stack — HOME's 12-unit threshold above all — not from a state-level rule of thumb borrowed from California or elsewhere.
The same gap applies to construction type. No published or independently verifiable Alabama-specific figure isolates the dollar or percentage cost premium for hitting the point-scoring brick threshold, adding a second story with elevators on an elderly project, or building masonry versus wood frame. AHFA's own "reasonableness" comparison is the only mechanism that exists, and it is not a number a developer can look up in advance.
The order to run this in
| Step | Action | Why |
|---|---|---|
| 1 | Clear Design Quality Standards and Construction Manual compliance first | AHFA's own financial-feasibility review folds DQS compliance directly into the cost-reasonableness test — proposed costs that significantly exceed DQS minimums draw extra scrutiny before anything else does |
| 2 | Confirm which building-code jurisdiction actually applies to the site | AHFA assumes a locally adopted IBC/IRC exists; where it doesn't, the fallback is AHFA's own 2009-or-newer floor, and the 2021 IECC / ASHRAE 90.1-2019 overlay applies regardless of what the locality has adopted |
| 3 | Decide whether an AHFA HOME loan is part of the stack before the unit count is fixed | This — not story count or construction type — is the actual Davis-Bacon decision in Alabama, and it belongs before the budget is locked, not after |
| 4 | Price developer, builder and general-requirements fees against Section II.F, source by source | The Rural Development acquisition sub-cap (8% instead of 15%) and the 6% general-requirements guideline are easy to model as one flat percentage and get wrong |
| 5 | Submit knowing AHFA's reasonableness review is the last word, not a published table | There is no CTCAC-style limit or TDHCA-style score to check the number against in advance — only AHFA's own comparison to that cycle's unpublished aggregate application data |
Where this goes wrong
- Assuming AHFA publishes a per-unit or per-square-foot cost ceiling the way CTCAC or TDHCA do. It does not. 'Reasonableness' is reset every application cycle from aggregate application and cost-certification data AHFA does not publish, so there is no table to check a budget against before submitting — only AHFA's own comparison after the fact.
- Importing California's 'prevailing wage is a capital-stack property' framing wholesale. Alabama has no state prevailing wage law to trigger at all — it was repealed in 1980. Flagging a deal as 'may be prevailing wage' because it carries soft public money, a correct instinct in California, has no state-law basis to check against in Alabama.
- Treating an AHFA HOME loan as free money without pricing Davis-Bacon. AHFA is itself the HOME participating jurisdiction and routinely layers its own HOME loan with a Housing Credit allocation on the same project. At 12 or more HOME-assisted units, Davis-Bacon clearance is required before construction may start (24 CFR §92.354) — a real, common Alabama trigger, not a hypothetical one.
- Missing that a Davis-Bacon compliance failure on one AHFA project follows a developer to the next one. AHFA's point-scoring addendum deducts 2 points per occurrence 'on any AHFA-Project (approved and/or Placed-In-Service),' so unresolved payroll or wage-posting issues on an older deal can cost points on an unrelated new application.
- Modeling the developer fee as a flat 15% regardless of funding source. The acquisition developer fee has its own sub-cap — 8% instead of 15% specifically on Rural Development-financed acquisitions — and it is easy to miss because it isn't flagged as a separate line item in a generic pro forma template.
- Treating the 6% general-requirements guideline as a hard cap or, conversely, as meaningless because it's only a 'general rule.' It is softer than the 8% builder-fee cap in wording, but AHFA still requires it to be cost-certified and can question line items outside that range at Actual Cost Certification.
- Underestimating the brick/masonry point-scoring requirement as a cosmetic choice. Hitting 4 of the 8 available new-construction exterior-finish points requires a minimum 40% (multifamily) or 50% (single-family) brick façade with no EIFS accepted — a real, scored material-cost decision that belongs in the budget from the start, not a late value-engineering target.
- Missing the minimum rehabilitation cost threshold. A rehab application whose Capital Needs Assessment underwrites hard construction cost below $20,000 per unit (or $12,500 for a previously AHFA-funded project) doesn't just score poorly — it fails threshold and the application terminates.
- Assuming syndication costs are capped the way California caps them. AHFA's QAP publishes no percentage limit on syndication expenses; only an undisclosed change to the syndication structure itself is treated as a negative action.
- Treating the requested credit amount as the number that will actually be funded. AHFA explicitly allocates the lesser of the amount requested or the amount it determines necessary for feasibility, and states plainly it will not fund a project priced well above its Design Quality Standards floor without other subsidy support.
- Building an Alabama modular-savings case on vendor figures. AHFA's manual requires modular construction to meet the same codes and Design Quality Standards as any other method, with no basis adjustment or cost-cap relief — and no credible Alabama-specific modular savings study exists to underwrite against.
- Assuming a single statewide building code the way California's CBC provides. Alabama code adoption is local; the applicable IBC/IRC edition depends on the jurisdiction, with AHFA's own 2009-or-newer floor applying only where no local building department exists — confirm the actual local code before pricing anything.
- HUD
- LIHTC
- State QAPs
- IRS § 42
- Housing Finance Agencies