Cost, construction type, and the labor package — Illinois

Hard cost limits: a sliding scale by Set-Aside and green certification tier, not a flat number

IHDA's Underwriting Standards Guide tests every Application's Grand Total Construction Costs (hard costs, excluding contingency) against a published per-square-foot ceiling — but that ceiling itself moves along two dimensions: the project's geographic Set-Aside, and how far up the green building certification ladder the project commits to climbing. A project that pursues an Advanced or Net Zero certification level is allowed a materially higher hard-cost ceiling than the same project at the Base level.

These limits were built, per IHDA, "utilizing recent historical data of Authority projects within each Set-Aside and verified against a third-party cost database." A project over the limit must submit a detailed cost breakdown explaining the overage; IHDA lists unusually high municipal impact fees, unusually stringent local building codes, and poor soil/environmental/geotechnical conditions as examples of acceptable justifications — and specifically states that wage standards, mandatory or scored accessibility standards, mandatory or scored green building standards, municipal architectural/aesthetic requirements, and stormwater management requirements are not acceptable reasons for a waiver. And even a project that falls within the published per-square-foot limit is not automatically safe: "the Authority reserves the right to deny a Project based on Total Development Costs per unit" — there is no separately published TDC-per-unit cap, only this reserved, case-by-case discretion layered on top of the PSF test.

Rehabilitation deals carry their own floor rather than just a ceiling: a minimum of $40,000 in hard costs per unit (excluding contingency), plus a mandatory minimum scope — full replacement of kitchen and bathroom cabinets/counters, all plumbing fixtures, all electrical fixtures (Energy Star), all flooring, and at least one additional major system. For 4% LIHTC rehabilitation deals specifically, rehabilitation expenditures must equal or exceed 15% of the portion of acquisition costs financed by tax-exempt bonds, net of land.

IHDA turns its own cost ceiling into a scoring incentive, not just a compliance gate: a Cost Containment scoring category awards up to 6 points to a project whose hard costs come in at or below 90% of the applicable limit (and at least 70% of total development cost for new construction, 65% for rehab), with a smaller 3-point band for costs between 90% and 95% of the limit. If costs later rise between Reservation and IRS Form 8609 such that the project would no longer have qualified for the points it was scored on, "such change ... could negatively impact future Applications to the Authority" — a real, stated consequence for a cost overrun after award.

General contractor fees: a 14% cap, split three ways

When there is an identity of interest between the general contractor and the owner, IHDA does not just cap the GC fee — it reduces the developer fee by the amount of the GC's overhead, on the reasoning that an affiliated GC shouldn't effectively double-collect overhead once through the construction contract and again through the developer fee.

Developer fee: a formula, a hard ceiling, and a mandatory deferral floor

IHDA calculates a Base Developer Fee by formula rather than a flat percentage of TDC: 5% of the first $20 million of acquisition cost, plus 15% of the first $5 million of Fee-Based Costs, plus 10% of Fee-Based Costs between $5 million and $15 million, plus 5% of Fee-Based Costs above $15 million (Fee-Based Costs being TDC net of the developer fee itself, acquisition, reserves, interim costs, and syndication costs). Identity-of-interest reductions apply on both the acquisition side (2.5% instead of 5% of the first $20 million, where buyer and seller are related) and the general contractor side, as noted above.

Deferral is not optional at the margin. Every project except Permanent Supportive Housing must defer, at minimum, the lesser of 25% of the Total Developer Fee or 75% of cumulative cash flow after debt service for years one through twelve of operations. Total deferred fee cannot exceed 100% of cumulative cash flow after debt service for the first 15 years unless the sponsor explains how it will otherwise be repaid — and a project's total developer fee cannot increase more than 10% above the amount calculated at initial award, with a further restriction for 9% deals: if the Authority Soft Loan request increases after tax credits are awarded, the developer fee cannot increase above the amount set at initial award at all.

Green building: a mandatory baseline for every project, plus up to 10 scored points for going further

Illinois does not treat green building as purely a scoring bonus. Every project other than minor rehabilitation "must adhere to the 2026 Enterprise Green Communities mandatory project criteria in the eight major sections of the EGC program" — Integrative Design, Location + Neighborhood Fabric, Site Design, Water, Energy, Materials, Healthy Living Environment, and Operations/Maintenance/Resident Engagement — regardless of whether the project pursues full EGC certification. "While full EGC certification is not required, all projects, whether a rehabilitation, new construction or adaptive reuse must adhere to the mandatory criteria of EGC." A project pursuing a qualifying Base, Net Zero, or Zero Carbon certification instead receives an automatic waiver of the EGC mandatory criteria — but must then adhere to that certification program's own mandatory criteria in its place. Sponsors pursuing points under the scored category's Non-Certification pathway are explicitly not exempted from the EGC mandatory requirement.

The scoring category and the hard-cost-limit table are linked by design: the higher certification tiers that unlock additional Green Building Design points are the same tiers that unlock the higher per-square-foot hard-cost ceilings shown above. A sponsor weighing whether to pursue Net Zero isn't just weighing 8 scoring points against construction cost — they're weighing it against a genuinely higher cost ceiling IHDA will accept for that same commitment.

The labor package: a real, currently-active state prevailing wage law that mostly misses LIHTC on its own terms

Illinois is different from several states already documented in this library in one important respect: it has a real, currently-enforced state prevailing wage statute, the Illinois Prevailing Wage Act (820 ILCS 130/), not a repealed or narrowly-scoped one. The Illinois Department of Labor sets county-by-county prevailing wage rates, and contractors and subcontractors on covered work must file certified payroll through an online portal under 820 ILCS 130/5.1 — a contractor found in violation twice within five years faces a four-year debarment from public works.

"Public works" is defined broadly on its face: "all fixed works constructed or demolished by any public body, or paid for wholly or in part out of public funds." But the Act's own text goes on to enumerate a specific, named list of financing mechanisms that trigger this test — the Industrial Project Revenue Bond Act, the Industrial Building Revenue Bond Act, the Illinois Finance Authority Act, the Illinois Sports Facilities Authority Act, the Build Illinois Bond Act, the Build Illinois Act, funds from the Riverfront Development Fund, the Fund for Illinois' Future, several school-construction and transportation bond and lease-financing statutes, and a handful of other named acts. The Illinois Housing Development Act, IHDA-issued tax-exempt bonds, the LIHTC program itself, and the Illinois Affordable Housing Tax Credit do not appear anywhere in that enumerated list, in the statutory text reviewed for this research. A privately-owned LIHTC deal financed purely with conduit tax-exempt bonds and federal tax credit equity — with no state grant, no state loan, and no named enumerated public financing source in the mix — does not obviously fall within the Act's own list of triggering mechanisms on the statute's face.

That reading has not been tested against Illinois case law or an Attorney General opinion in this research, and the base "paid for wholly or in part out of public funds" clause is broader than the enumerated list alone — whether a conduit bond issuance by IHDA or the City of Chicago, standing alone, itself constitutes being "paid for ... out of public funds" for Act purposes was not resolved here and should be confirmed with Illinois counsel on a deal-specific basis, particularly where a public housing authority sits in the ownership or financing structure.

What is directly documented, and considerably more important in practice for most IHDA deals, is that IHDA imposes its own prevailing wage condition administratively, independent of whether the state Act's own statutory test is satisfied. The Underwriting Standards Guide states plainly: "Projects that require an Authority Soft Loan, must budget construction costs using the higher of Illinois Prevailing Wage or Davis Bacon contractor wage standards. This ensures the Project's feasibility is not contingent on a specific source of funding." Every Application requesting an Authority Soft Loan must also disclose "the expected Wage Standard (e.g., Illinois Prevailing Wage, Davis Bacon Wages) that the Sponsor expects to use for the Project." Chicago's own Underwriting Standards Guide imposes an equivalent disclosure requirement for City gap financing and Tax Increment Financing requests, and states that projects seeking Multifamily Gap Financing from the City "must comply with additional requirements, including ... wage standards."

Because "Authority Soft Loan resources are over-subscribed," the QAP states that "Projects seeking 4% LIHTC outside the 9% LIHTC round are ineligible to apply for Soft Loans" at all — meaning the population of deals actually bound by IHDA's own prevailing-wage soft-loan condition is narrower than "every IHDA LIHTC deal." A stand-alone 4% bond deal with no IHDA soft loan in its capital stack may not be pulled into either the state Act's own test or IHDA's soft-loan condition — while a 9% deal, which routinely carries IHDA gap financing, is considerably more likely to be bound by the higher-of-Illinois-Prevailing-Wage-or-Davis-Bacon standard as a practical matter of IHDA's own underwriting requirement, independent of the statute.

Federal Davis-Bacon applies on its own separate terms whenever HOME funds or National Housing Trust Fund dollars are layered into a deal, regardless of the state-law analysis above — LIHTC alone does not trigger it. IHDA's own guidance frames the interaction directly by requiring "the higher of" the two wage standards where both could apply, rather than treating them as mutually exclusive. Any project receiving federal funding is separately subject to Build America, Buy America Act domestic-content requirements, which IHDA and Chicago's DOH both flag as a real, potentially significant cost factor to model at the time of Application rather than after award.