Cost, construction type and the labor package — Colorado

Three checkpoints, and the smallest of three methods sets the number

CHFA tests project cost at three points in a deal's life, and says so directly: this analysis "will be done (i) at the time of Preliminary Application, (ii) at the time a Carryover Allocation is approved (if applicable), and (iii) at the time the project is placed in service (after all project costs are finalized and a third-party cost certification has been completed)." Each pass has a different owner and a different consequence if it goes wrong.

The number that actually controls comes from Section 3.M.1: "CHFA will estimate the Housing Tax Credit amount needed by a project using three calculation methods. The amount of Housing Tax Credits reserved will be based on the smallest of the amounts resulting from these calculation methods." Method One is the standard qualified-basis calculation (eligible basis × applicable fraction × applicable percentage rate). Method Two is a gap calculation (total uses minus total non-credit sources, divided by the equity factor and by 10 years). Method Three — "this method compares project development costs with standards originally based on RS Means cost information data" — is the one that functions like a per-unit cost ceiling: CHFA revises it annually from construction-cost resource publications, and it accounts for unit mix, size, construction features and location.

That is a real structural difference from CTCAC. Method Three behaves like CTCAC's threshold basis limit in that it caps what counts toward the credit calculation, but Colorado has no equivalent of CTCAC's 130-percent high-cost test that can disqualify an application outright. A Colorado project priced above the Method Three limit is not rejected — it is simply funded at whichever of the three methods produces the smallest number, which may be Method Three or may be the gap calculation instead. The other real difference is publication: unlike CTCAC's standalone PDF of dollar thresholds by county and bedroom count, Colorado's current-year Method Three limits live only inside that year's electronic Housing Tax Credit Excel Application — there is nothing to check against before pulling the actual file from CHFA's site.

One consequence follows from this mechanism that CHFA does not spell out directly but that falls straight out of the math: a basis boost only changes the outcome when Method One — the qualified-basis calculation the boost actually feeds — is already the smallest of the three. If Method Two's gap or Method Three's cost basis limit produces a lower number, a project that "qualifies" for the federal 30 percent QCT/DDA/Small Area DDA boost, or for CHFA's own discretionary basis boost under Section 3.M.2, can carry that eligibility without it moving the actual credit awarded.

Developer, contractor and consultant fee caps — and the one place CHFA lets the fee grow after the fact

Section 3.M.3 sets two aggregate fee ceilings, and both bite the same way: "CHFA will limit contractor (builder's profit and overhead) fees and developer fees in calculating the amount of Housing Tax Credits to be allocated... a reduction in fees will result in a reduction of eligible basis." Both run as pure percentages, closer to Texas's or Alabama's structure than to CTCAC's percentage-plus-hard-dollar-cap model.

The fee is meant to be locked early and stay locked. CHFA states plainly: "Developer fees may not increase after Preliminary award," and separately, for the federal 4 percent process, "Developer fees may not be increased after Initial Determination." The one carve-out sits inside the federal-4-percent-only path: for projects with no state credit, "CHFA allows an exception of a CHFA approved fully deferred increase included in eligible basis that is payable during the Initial Compliance period and necessary for financial feasibility," which must be approved before partnership closing and is treated as an exception rather than a second Initial Determination.

There is no separate, published percentage cap on how much of the developer fee can be deferred — CHFA instead folds deferred-fee risk into its feasibility review. In evaluating Overall Financial Feasibility and Viability, CHFA states it will consider, over the 15-year pro forma period, "debt coverage ratios, the ability to pay deferred developer fees from cash flows, operating reserve amounts, and annual operating expenses," and requires justification if any pro forma assumption exceeds a threshold requirement.

One more distinction is easy to miss: Section 3.N's Subsidy Layering Review — the HUD/CHFA fee check triggered when Housing Tax Credits combine with Section 221(d)(4), 223(f), or 542(c) mortgage insurance, flexible subsidy, or project-based Section 8 — is a different gate from federal Davis-Bacon. The QAP is explicit that "HOME or CDBG funding, when combined solely with Housing Tax Credits, do not trigger the subsidy layering review process" — but that silence says nothing about labor standards. HOME still triggers Davis-Bacon on its own federal terms (see below) even where it never touches CHFA's fee-reasonableness review.

Construction type: a mandatory green-building floor, not a scored option

Colorado does not score sustainability as a competitive bonus the way many QAPs do — it makes it a threshold. Threshold #12 requires "evidence that the proposed project will receive a green building certification," and CHFA states directly it "requires all projects to obtain green building certification," accepting Enterprise Green Communities (EGC), LEED, or the National Green Building Standard (NGBS). Unlike zoning (Threshold #7, which is not curable), a documentation gap on Threshold #12 does get CHFA's one-business-day clarification window under Section 3.B.4 — so the certification requirement itself is not negotiable, but a missing form is fixable.

A separate statewide overlay layers on top of CHFA's own requirement for larger buildings. Per the QAP's own citation, Colorado's HB21-1286 ("Energy Performance for Buildings"), in effect since 2023, "requires owners of commercial, multifamily, and public buildings 50,000 square feet or larger to annually benchmark their whole-building energy use and meet set building performance targets," with a sector-wide target of a 7 percent emissions cut by 2026 and 20 percent by 2030 off 2021 levels — a real, additional compliance obligation for any mid-rise-or-larger Colorado LIHTC building, independent of and in addition to the QAP's own green-certification threshold.

Modular construction earns competitive points, not a basis boost: Section 5.B.3(f) awards five points for "projects maximizing construction efficiency by utilizing modular or factory-built construction, prefabricated components," but there is no eligible-basis or cost-cap adjustment attached. What is different from a purely cosmetic scoring item is that Threshold #9 tests the claim at underwriting — a modular proposal must break down "the number of boxes and cost per box" and detail on- and off-site installation, so a modular savings claim has to survive the same third-party cost estimate as any other line item, not just a narrative for points.

A real, state-specific rehab floor sits inside Section 3.M's cost-reasonableness factors: "hard costs for rehabilitation, not including costs for acquisition or any soft costs, must exceed the greater of 20 percent of the buildings adjusted basis or $20,000 per unit to be eligible for Housing Tax Credits." That $20,000 CHFA floor is more than double the federal statutory minimum — for calendar year 2026, the per-low-income-unit qualified basis amount under 26 U.S.C. §42(e)(3)(A)(ii)(II) is $8,700, per IRS Revenue Procedure 2025-32 — meaning a rehab deal can clear the federal bar and still fail Colorado's own higher one.

Threshold #11 sets a hard, unscored amenity floor that drives cost regardless of construction type: stove/oven/vent hood, refrigerator, dishwasher (waived only for studios/one-bedrooms in 100-percent homeless/special-populations projects), disposal, air cooling, and an elevator requirement at four or more floors generally (two or more floors for age-restricted projects). Universal Design or accessible units at five percent or more of the total earns a separate two points under Section 5.B.3(g), on top of, not instead of, the amenity floor.

The labor package: a real state prevailing wage law that doesn't reach a privately owned LIHTC deal — and a Denver fight over whether it should

Colorado's position here is genuinely different from the states this library has covered so far. Alabama's state prevailing wage law was repealed outright in 1980. Colorado's is real and current: the Colorado Quality Apprenticeship Training Act of 2019 (SB19-196) added a Prevailing Wage for Public Projects part to the state's Construction Bidding for Public Projects Act, codified at C.R.S. §24-92-201 et seq., effective July 1, 2021. Colorado's own Division of Labor Standards and Statistics actively enforces it and issues guidance on it.

But its trigger is procurement, not subsidy, and that keeps it from reaching a typical LIHTC deal on its own terms. CDLE's own guidance states it plainly: "The prevailing wage requirement for state projects applies to every contractor who is awarded a contract of $500,000 or more for a public project by a government agency, as well as their subcontractors." A privately owned tax credit partnership contracting with its own general contractor is not itself "a government agency" awarding the contract — the statute's own definition of a covered project does not naturally describe a CHFA-financed private development, even though the credit itself is a form of state assistance. The Act also excludes work for cities, counties, school districts and other "political subdivisions of the state... because they are not agencies of the state government" — a distinction that matters directly for the Denver wrinkle below. Consistent with that reading, the 2025-2026 QAP itself never mentions prevailing wage or Davis-Bacon anywhere in its text.

The state's own Affordable Housing Tax Credit carries no separate labor standard either. Its statute — C.R.S. §§39-22-2101 through 39-22-2108, eight sections covering definitions, the credit itself, recapture, filing, parallel credits, rules, compliance monitoring, and reporting — contains no wage, apprenticeship, or labor-standards provision anywhere in it.

The live exception sits in Denver, not in state law. Denver has had its own prevailing wage ordinance for decades — the city's Auditor's Office states directly that "Prevailing wage is ordinance §20-76 of the Denver Revised Municipal Code," and that "[a]ny project with City and County of Denver funding, or any project on City and County of Denver owned or leased property, requires prevailing wage compliance." Since 2017, though, Denver has funded affordable housing built on private land, and — per an April 2026 Denverite report — "the city's Department of Housing Stability has not been enforcing the law for construction firms working on city-supported affordable housing projects," a position the Johnston administration formalized in a July 2024 exemption memo arguing that city-funded projects on private land fall outside the ordinance. A November 2023 Denver Auditor's Office report had already found the department "is not ensuring contractors comply with wage laws," warning that weak enforcement could jeopardize federal funding and leave workers underpaid. As of the most recent reporting found in this pass (a City Council committee vote in April 2026 advancing clarifying language, not yet a final Council vote), the dispute is unresolved — a Denver-located project taking city gap financing should confirm the Department of Housing Stability's current enforcement position directly rather than assume either side of the fight has settled it.

The cost of guessing wrong on wage classification is not abstract: Denver Labor's review of the Urban Peak shelter project found contractors had been paid residential wage rates on work later classified as commercial, which auditors estimated could add $2 million to $4 million to that project's cost. Urban Peak was a shelter project, not a Housing Tax Credit deal, but the underlying risk — a residential-versus-commercial wage determination reclassified mid-project — applies to any Denver-subsidized affordable housing construction contract, LIHTC included.

What the benchmarks support, and what they don't

Colorado has no equivalent of CTCAC's published threshold basis limit table or TDHCA's Cost of Development per Square Foot schedule — Method Three's limits exist, but only inside the current year's Application file, not as a document a developer can benchmark against in advance.

GAO's 2018 nationwide review sampled 12 allocating agencies — 10 states and 2 cities: Arizona, California, Chicago, Florida, Georgia, Illinois, New York, New York City, Ohio, Pennsylvania, Texas, and Washington — for 2011–2015 completions. Colorado was not among them, so even the best available federal cross-state dataset has no Colorado figure in it; that gap should not be papered over with a neighboring state's number.

The nearest Colorado-specific cost study found is the 2016 CHFA-commissioned Root Policy Research report examining LIHTC development cost trends and their causes, whose stated top finding was that rising labor costs drove overall cost increases the most. That study predates both the current QAP and Colorado's 2021 prevailing wage law and should be read as historical context, not a current benchmark. No independently verifiable Colorado-specific study isolating a prevailing-wage cost premium, or a modular-construction savings figure, was located in this pass — unsurprising given how narrowly the state prevailing wage law actually reaches LIHTC deals, and consistent with the same gap other states in this library show for the same reason.

The order to run this in