"What does it cost, and is prevailing wage even something I need to plan for?"
Four passes, tested at four checkpoints, not two
Cost estimation is not one event anywhere in this industry. It is four escalating passes, each with a different owner and precision band, and that structure is universal rather than Indiana-specific. What differs by state is which document holds the number IHCDA treats as governing, and how often that number gets re-examined.
| Pass | Who produces it | Precision | Timing |
|---|---|---|---|
| Napkin / screening estimate | Developer's own model, in Excel | ±30–40% | Minutes to hours |
| Concept estimate | Architect's schematic set priced by a GC preconstruction team or third-party estimator | ±15–20% | Two to six weeks after schematic design |
| Application budget | Developer and tax credit consultant, entered into IHCDA's Rental Housing Finance Application (Form A) | Reviewed for 'reasonableness,' never formally locked against a published limit | — |
| GMP or hard bid | GC pricing | ±3–5% | Three to nine months after the concept estimate |
Unlike a state that locks a number at application and only revisits it at placed-in-service, IHCDA's Qualified Allocation Plan (QAP) tests development feasibility — including 'the general reasonableness of the development costs and operating budget, as well as reasonableness in direct comparison to similar costs in other applications' — at four separate checkpoints: initial application, LIHTC allocation, any material change to the application or development, and final application for the IRS Form 8609. There is no single moment where the cost number is safely locked.
Who is actually in the room: developer project manager, architect, GC preconstruction estimator, and the tax credit consultant assembling Form A. A labor-compliance specialist only joins if a specific federal Davis-Bacon trigger (covered below) shows up in the capital stack — there is no state-level prevailing wage overlay in Indiana to coordinate alongside it, which is the single biggest structural difference from most other LIHTC states.
Cost pressure discovered late has real teeth here. Any modification requiring IHCDA approval carries a $1,000 modification fee, plus additional fees if legal documents must be amended or IHCDA has to re-underwrite the deal. A reduction in the number of tax credit units produced triggers a fine of $10,000 per unit reduced. And if the final application's score doesn't match the initial application's score — for example because a cost-driven value-engineering pass quietly dropped a scored commitment — IHCDA can impose a $5,000 fine per point lost plus a one-year suspension of the entire Applicant/Owner/Developer team from every IHCDA capital funding source, not just the LIHTC program.
No published cost-limit table — the ceiling is a flat dollar cap on the credit
IHCDA does not publish a CTCAC-style table of per-unit, per-bedroom, or per-county cost limits. There is no regional variation built into the regulatory ceiling at all. Instead, the ceiling sits on the credit request itself, and it is a single statewide number regardless of where in Indiana the development sits.
| Ceiling | Citation | Detail |
|---|---|---|
| 9% credit ceiling | QAP Part 5.3(A) | The amount of 9% LIHTC allocated to any single development may not exceed $1,300,000 per year, regardless of county or eligible basis |
| 4% credit / bond ceiling | QAP Section 3 | Applications for 4% LIHTC with tax-exempt private activity bonds are capped at $45,000,000 in bond volume per request; IHCDA may reduce the cap or close the application round by RED Notice if bond volume runs short |
The cost-reasonableness check that stands in for a bright-line high-cost test is entirely discretionary. Part 5.3(G) states plainly: 'IHCDA may disallow or reduce any costs deemed to be unreasonable on a per unit, per square foot, or line-item basis.' There is no percentage formula and no published comparison table an outside applicant can check in advance — the standard is comparison 'to similar costs in other applications' that only IHCDA has on file.
| Boost | Citation | Condition |
|---|---|---|
| Up to +30% | QAP Part 5.2(L) | Development located in a federally designated Qualified Census Tract (QCT) or Difficult to Develop Area (DDA); acquisition costs are excluded from eligible basis before the calculation |
| Up to +30% (discretionary; does not stack with the QCT/DDA boost) | QAP Part 5.2(L) | 9% applications only, and only where the development is in a Governor-declared disaster area, is competing in the Community Integration, Preservation, or Supportive Housing set-aside (or scoring under Integrated Supportive Housing), or commits to the maximum 16 points under the Rent Restrictions scoring category |
The fee and contingency caps that actually bind the budget
With no per-unit cost table, the caps that do the real work in Indiana are percentage limits on fees and contingency, set out in QAP Part 5.3.
| Contractor fee line | Limitation |
|---|---|
| General Requirements | 6% of Total Construction/Rehabilitation Cost |
| Builder's Overhead | 2% of Total Construction/Rehabilitation Cost |
| Builder's Profit | 6% of Total Construction/Rehabilitation Cost |
| Total | 14% of Total Construction/Rehabilitation Cost |
Calculated by dividing the sum of General Requirements, Builder's Overhead and Builder's Profit by the sum of Sitework, New Building, Rehabilitation and Accessory Building costs. Developer fee, sitework outside the construction contract, demolition hard costs and hard cost contingency are excluded from the base. IHCDA permits savings in one line to offset overruns in another as long as the total stays at or under 14%.
The architect fee, including design and supervision, is capped at 4% of total hard costs plus sitework, general requirements, overhead, profit and construction contingency (Part 5.3(D)). Exceeding it requires a competitive negotiation procedure under Schedule H.
| Development type | Hard cost contingency limit |
|---|---|
| New construction | 5% of hard costs |
| Rehabilitation of existing housing | 15% of hard costs |
| Historic rehabilitation or adaptive reuse | 20% of hard costs |
Soft cost contingency is capped separately at 3% of total soft costs for any construction type. A development with more than one construction type applies each limit to its own portion of the budget.
The developer fee cap works differently from the contractor fee cap — it is not a hard ceiling. Under Part 5.3(B), the maximum developer fee is 15% of eligible basis, but any amount above $2,500,000 must be deferred and paid out of cash flow rather than disallowed outright. Consultant fees, related-party guaranty fees, and similar charges count toward the same cap. Deferred fee only counts toward eligible basis if it is actually paid off by the end of the 15-year compliance period — an unpaid deferred note is a basis problem waiting to surface at final cost certification.
There is no separate syndication-expense cap. A syndicator fee is only a disclosure item under Part 5.3(H)'s Related Party Fees requirement (Form N), reviewed under the same discretionary reasonableness standard as every other cost line rather than bounded by its own percentage rule.
| Construction type | Minimum contribution |
|---|---|
| New construction, age-restricted | $250 per unit per year |
| New construction, non-age-restricted | $300 per unit per year |
| Single-family units | $420 per unit per year |
| Rehabilitation of existing housing | $350 per unit per year |
| Historic rehabilitation or adaptive reuse | $420 per unit per year |
Escalates 3% per year. A development with more than one construction type blends the minimum pro rata by unit count — this is where construction type actually reaches the operating pro forma in Indiana.
Construction type sets the envelope, not the eligible basis
Indiana's building code is the 2014 Indiana Building Code, adopting the 2012 International Building Code with state amendments, codified at 675 IAC 13-2.6 and effective December 1, 2014, administered by the Indiana Fire Prevention and Building Safety Commission. Its Table 503 governs allowable height and area by occupancy and construction type the same way any state building code does. This research pass could not independently confirm the exact current story-count and height figures for every Group R-2 construction type against the primary table text — read the adopted table directly, the way you would for any jurisdiction, before underwriting a specific story count.
What is confirmed: unlike a QAP that grants an eligible-basis increase for building in a heavier construction type, IHCDA's QAP grants no such bump. Construction type reaches the Indiana budget only through the hard-cost contingency percentage (5% new construction versus 15% rehabilitation versus 20% historic/adaptive reuse, Part 5.3(F)) and the replacement-reserve minimum (Part 5.2(F)) — not through the credit side of the deal.
Green and energy-efficiency certification is a scoring lever, not a basis lever. Under Part 6.2(K), an applicant that commits to LEED Certified or National Green Building Standard Bronze earns 1 scoring point; LEED Silver, NGBS Silver, Enterprise Green Communities, or Passive House earns 2 points, and the certifying 'Green Professional' must be a design-team member separate from the project architect or engineer. Budgeting the certification's soft cost against an assumed increase in eligible basis — as some other states' QAPs structure it — overstates available proceeds in Indiana.
No rigorous, published, Indiana-specific study of LIHTC construction cost by construction type (wood frame versus podium versus mid- or high-rise) or by region turned up in this research pass, comparable to what some other states' housing agencies or research centers have produced. A developer pricing Indiana's premium for going vertical has to build that number from its own GC's bids, not from a public dataset — that is an honest gap, not a settled fact to guess at.
The labor package: no state prevailing wage since 2015, so Davis-Bacon is the whole story
The single fact that reshapes this entire phase for an Indiana deal: 2015 House Enrolled Act No. 1019 repealed the Common Construction Wage Act (CCWA), Indiana's state prevailing wage law, effective July 1, 2015. This is independently confirmed by the U.S. Department of Labor's Wage and Hour Division, which lists Indiana among states without a current state prevailing wage law and notes that wage scales adopted for contracts over $350,000 and awarded before July 1, 2015 remain enforceable but nothing new does. The Indiana Department of Labor's own report to the General Assembly, submitted June 30, 2021, tells the same story from the inside.
Before repeal, the CCWA applied to public works — defined as construction paid for in whole or in part out of public funds — that were let (awarded) by a state or local government body, above a threshold that rose from $150,000 at the 1995 rewrite, to $250,000 in 2011, to $350,000 in 2013. Federally funded work was carved out and paid under Davis-Bacon instead. Because the trigger required the contract to be let by a public body, a privately owned, privately let LIHTC construction contract generally fell outside the CCWA's reach even when public subsidy sat in the capital stack — and now the entire mechanism is repealed regardless, so that question doesn't even arise.
HEA 1019's replacement structure, according to secondary legal summaries of the act, sits at Indiana Code Articles 4-13.5 and 4-13.6 and swaps the old wage-committee mechanism for an Indiana-resident-workforce and E-Verify compliance regime on public works contracts — a minimum prime-contractor value-contribution requirement, a bar on cash payments to employees, and an increase in the 'small projects' exemption from $150,000 to $300,000. This research pass did not independently pull the verbatim statutory text of those two articles, and on its face this replacement regime, like its predecessor, appears to target contracts let by a public body rather than a privately owned LIHTC development. Treat its applicability to any specific deal structure as a question for counsel, not for a model.
| Funding source | Trigger |
|---|---|
| HUD Section 221(d) loan financing | Any size |
| HOME Investment Partnerships Program | 12 or more HOME-assisted units |
| Project Based Vouchers | 9 or more PBV units |
| Section 811 Project Rental Assistance | 12 or more 811 PRA units |
| CDBG | 8 or more total units, with CDBG funding |
Form A must acknowledge whether Davis-Bacon applies to the development. If it does, the General Contractor Affidavit must commit the GC to Davis-Bacon prevailing wages and all Davis-Bacon recordkeeping and compliance requirements.
The practical upshot: an Indiana deal financed entirely with LIHTC equity and conventional or IHCDA soft debt — no HOME, PBV, 811 PRA, CDBG, or 221(d) money anywhere in the stack — can be entirely free of prevailing wage, state or federal. That is a materially different cost profile from a state that never repealed its wage law. It also means the labor-cost question in Indiana isn't 'how much does prevailing wage add to the budget' — it's a binary, source-by-source check of the capital stack against five specific unit-count or loan-type lines in the table above. Indiana's own state gap-financing tools — the Affordable and Workforce Housing Tax Credit (AWHTC) and Regional Economic Acceleration and Development Initiative (READI) funds routed through the Indiana Economic Development Corporation — are state dollars and do not themselves trip any of those five federal triggers, but they do reshape which federal sources end up in the stack alongside them, which is what actually decides the answer.
What's missing, and the order to run this in
The five decisions below are jointly determined, and getting the order wrong is how a developer discovers a Davis-Bacon trigger or a blown fee cap after the budget is already represented to the equity investor.
| Step | Action | Why |
|---|---|---|
| 1 | Fix the unit mix and construction type against the site's zoning, parking and building-code envelope | Indiana ties construction type to contingency percentage and reserve minimums, not to eligible basis — this is a buildability and operating-cost decision, not a credit-sizing one |
| 2 | Check every source in the capital stack against IHCDA's five Davis-Bacon triggers | This is the entire labor-cost decision in Indiana; there is no state-law overlay left to catch what this check misses |
| 3 | Assemble the fee and contingency budget against the Part 5.3 percentage caps | Contractor fee, architect fee, and hard/soft cost contingency are hard ceilings, independent of and in addition to the credit-request ceiling |
| 4 | Confirm the resulting credit request fits under the $1,300,000 9% ceiling or the $45,000,000 bond ceiling | Crossing either line forces a restructuring of the deal, not just a bigger ask |
| 5 | Only then take the reasonableness/feasibility review as a standing test, not a one-time gate | IHCDA can reopen it at initial application, at LIHTC allocation, at any material change, and again at final application for Form 8609 |
What this research pass could not produce, and did not guess at: a published Indiana per-unit or per-square-foot cost-limit table (none exists — the gate is discretionary), a verified story-by-story building-code height table for every R-2 construction type, verbatim statutory text for the post-2015 public-works workforce regime at IC 4-13.5/4-13.6, and any rigorous empirical study of Indiana LIHTC construction cost by construction type or region. Each of those gaps is flagged above rather than filled with an invented number.
Where this goes wrong
- Budgeting a state prevailing-wage premium out of habit. Indiana repealed the Common Construction Wage Act statewide effective July 1, 2015 (2015 HEA 1019). Carrying a state wage-rate line that no longer exists wastes basis on a false line item — and, worse, can distract the team from checking the trigger that does exist: federal Davis-Bacon, buried in whichever federal source is in the capital stack.
- Missing a federal Davis-Bacon trigger because there's no state-law reflex to prompt the check. A HUD 221(d) loan pulls it in at any size; HOME needs only 12 assisted units, PBV only 9, Section 811 PRA only 12, and CDBG only 8 total units. A deal can cross one of these lines by adding a single additional assisted unit late in underwriting without anyone re-running the Davis-Bacon question.
- Treating the $1,300,000 9% credit ceiling as a soft target. It is a hard, statewide, per-development annual ceiling with no county variation (Part 5.3(A)). A project whose eligible basis would generate more credit than that must shrink the request or move to the 4%/bond path — where the ceiling becomes the $45,000,000 bond-volume cap instead.
- Signing a fixed-price GC contract without checking it against the 14% contractor fee cap first. The cap tracks three separate sub-limits (General Requirements 6%, Overhead 2%, Profit 6%) against a specific cost base that excludes developer fee, non-contract sitework, demolition hard costs and hard cost contingency — a GC's ordinary market markup on a small rehab job can exceed it even when the price itself is perfectly reasonable, and the excess simply isn't fundable in basis.
- Assuming the 15% developer fee figure is a hard ceiling the way the contractor fee cap is. It isn't — amounts above $2,500,000 must be deferred and paid from cash flow (Part 5.3(B)), not disallowed. Underwriting that deferred slice as though it will automatically land in eligible basis ignores that it only counts if it is actually paid off by the end of the 15-year compliance period.
- Cutting units or dropping a scored commitment during late-stage value engineering with no expectation of consequence. Part 7.6 imposes a $10,000 fine per tax-credit unit reduced, and a separate $5,000-per-point fine plus a one-year suspension of the entire Applicant/Owner/Developer team from all IHCDA capital funding if the final application's score doesn't match the initial application's. A cost-driven cut to a scoring commitment is not free.
- Reaching for a national or another state's construction-cost-per-unit benchmark because Indiana doesn't publish one. No rigorous, published, Indiana-specific study of LIHTC construction cost by construction type or region was located in this research pass. IHCDA's own stated method — comparison 'to similar costs in other applications' it already has on file (Part 5.3(G)) — isn't visible to an outside applicant in advance.
- Assuming the discretionary basis boost (up to an additional 30%) is generally available. Part 5.2(L) restricts it to 9% applications in a Governor-declared disaster area, three named set-asides (Community Integration, Preservation, Supportive Housing), or maximum Rent Restrictions scoring — and it does not stack with the separate 30% QCT/DDA boost.
- Confusing green or energy certification with a basis increase. Under Part 6.2(K) it is worth at most 1–2 QAP scoring points, not additional eligible basis. Budgeting the certification's soft cost against an assumed proceeds bump — the way some other states' basis-limit boost menus work — overstates the deal's sources in Indiana.
- Assuming the post-2015 public-works statute (IC 4-13.5/4-13.6) reaches a privately owned LIHTC deal the way a funding-source test would. On the available secondary summaries, it appears to target contracts let by a public body, the same scope the repealed CCWA had — but the verbatim statutory text wasn't independently verified in this research pass, so treat its reach as a question for counsel, not an assumption to underwrite.
- Assuming no state prevailing wage means no vertical-circulation or accessibility premium. Elevator requirements and NSPIRE/accessibility standards in QAP Part 5.4 apply regardless of the labor-law question, and they are a construction-type and cost decision entirely independent of whether Davis-Bacon ever attaches.
- HUD
- LIHTC
- State QAPs
- IRS § 42
- Housing Finance Agencies