"Is there an actual per-unit cost ceiling we have to hit, does the credit-efficiency scoring item really dock points for coming in high, and does Michigan's reinstated prevailing-wage law actually reach a privately-owned LIHTC development?"
Cost ceiling: an index formula, not a borrowed per-unit table
Rather than publishing its own flat per-unit or per-square-foot cost limit, or borrowing HUD's, MSHDA ties its Maximum Total Development Cost per unit to a national construction-cost index: "The Maximum Total Development Cost per unit limit is determined by multiplying the average of the Construction Cost Index for the most recent year available, as published by Engineering News-Record, by a conversion factor. For Open Urban, PSH or adaptive reuse projects in Urban areas, that factor is 36. For all other projects, that factor is 33." The QAP directs applicants seeking clarification on the calculation to the Cost Reasonableness with Credit Efficiency section of the Scoring Criteria, where the same cost data ultimately feeds a project's score.
A separate, flat floor applies only to the 9% side: "All applications for 9% credit must indicate a need for at least $25,000 per unit in hard rehab or construction costs (including both building and site costs, but excluding allowable amounts for General Requirements, Builder Overhead, Builder Profit, contingencies, etc.)." A 4%/bond deal has no Michigan-specific hard-cost floor of its own — it "will only need to meet the minimum requirements found in Section 42 of the Internal Revenue Code."
Cost Reasonableness with Credit Efficiency: mandatory for every project, and it can cost you points
The Scoring Criteria's own section header removes any doubt about whether this item is optional: "F. Cost Reasonableness with Credit Efficiency - (Mandatory for All Projects)." Every application is scored on its eligible tax credit amount per LIHTC unit, "compared to average credit per unit data for the previous five years that has been inflated to account for yearly cost increases," separately by building type — New Construction, Preservation/Existing Development, and Vacant Uninhabitable Rehab or Adaptive Reuse. Within each building type, unit counts are weighted into an "Effective Unit Count" using bedroom-size factors before the comparison is made.
| Unit size | Factor |
|---|---|
| 0 Bedroom | 0.90 |
| 1 Bedroom | 1.00 |
| 2 Bedroom | 1.15 |
| 3+ Bedroom | 1.25 |
2026-2027 LIHTC Scoring Criteria, Section F worksheet.
The scoring mechanism itself, quoted directly: "Projects whose credit per unit is within the 'safe harbor' identified will receive 0 points. The 'safe harbor' is calculated using an amount that is 2.5% above and 2.5% below the cost average for each project-type. Projects whose credit per unit is below the 'safe harbor' will receive up to five additional points. Projects whose credit per unit is above the 'safe harbor' will receive up to five negative points." That last sentence is the real risk most scoring narratives gloss over: coming in above the safe harbor doesn't just forfeit bonus points, it actively subtracts from the applicant's total score. MSHDA reserves the right to update the underlying five-year cost data and inflation factors "as new data and inflation factors become available," so the safe harbor itself moves from round to round rather than being fixed.
Where a project combines building types, the Scoring Criteria calls for "the weighted average of those points... used for the project score, with a maximum of 8 points" — language that sits oddly next to the item's own "Possible Points" column, which lists a flat 5 both in the detailed worksheet and in the Scoring Criteria's own Quick Reference Sheet. This research could not resolve which figure — 5 or 8 — actually governs a blended-building-type project's cap; both appear in MSHDA's own current document. Confirm directly with MSHDA before assuming either number for a mixed-building-type application. As already noted in the program-election discussion, a 4%/9% Mixed Transaction with MSHDA's approval may combine the total LIHTC units created or rehabbed across both its 4% and 9% components for this calculation, entering only the competitive round's own 9% credit amount on the credit side.
Contractor and developer fee caps
| Item | Limit | Base |
|---|---|---|
| General Requirements | 6% | Construction costs, exclusive of builder profit, builder overhead and general requirements |
| Builder Overhead | 2% | Construction costs, exclusive of builder profit and builder overhead |
| Builder Profit | 6% | Construction costs, exclusive of builder profit |
2026-2027 QAP, Section X.B. Each cap is computed exclusive of the other two, so the three together can reach as much as 14% of construction costs — not a single combined 6% limit.
| Program | Formula |
|---|---|
| Tax-exempt bond/4%, 49 units or fewer | 7.5% of acquisition costs + 7.5% of project reserves + 20% of all other development costs; capped at $2,100,000 for gap-financing sizing purposes |
| Tax-exempt bond/4%, 50 units or more | 7.5% of acquisition costs + 7.5% of project reserves + 15% of all other development costs; capped at $2,100,000 for gap-financing sizing purposes |
| 9% LIHTC, no Emerging Developer partnership | Lesser of $1,800,000 or (7.5% acquisition + 7.5% reserves + 15% of all other development costs) |
| 9% LIHTC, with Emerging Developer partnership | Lesser of $2,100,000 or (the above calculation + $300,000) |
2026-2027 QAP, Section X.A. Up to 50% of the total developer fee may be deferred to cover a funding gap; if the pro forma shows insufficient cash flow to repay the deferral within 15 years, the applicant must explain the repayment plan in the narrative.
The fee schedule is not a blanket "4% beats 9%" rule. The richer 20%-of-other-costs tier applies only to bond deals of 49 units or fewer; a 50-unit-or-larger bond deal drops to the same 15% figure a 9% deal uses. Fee sizing in Michigan turns on unit count and program category together, not a simple federal-credit-type comparison — a large bond deal and a large 9% deal use the identical 15% formula on the "other development costs" line, differing only in the dollar cap and, for 9% deals without an Emerging Developer partner, the acquisition/rehabilitation developer-fee-to-basis attribution rule (at least 5% of acquisition cost of land and buildings must be attributed to the acquisition basis via developer fee).
Green building: mandatory at a base tier, scored — and basis-boost-eligible — at a higher one
MSHDA's Energy Efficient Building (EEB) Policy is not a single scoring bonus; it is two tiers layered on the same underlying certifications. The threshold tier is mandatory for every applicant: "All projects applying for and receiving tax credits will be required to incorporate one of the building certification standards listed below" — Enterprise Green Communities Certification, National Green Building Standard, USGBC LEED, or (for Native American housing projects specifically) Guiding Principles for Sustainable Federal Buildings, each at a defined baseline level (e.g., Enterprise Green Communities' mandatory-plus-optional-points criteria for the applicable construction type, NGBS Silver/Gold/Emerald, or LEED Silver/Gold/Platinum).
| Certification track | Threshold tier (mandatory, 0 QAP points) | Scored tier (optional, QAP points) |
|---|---|---|
| Enterprise Green Communities | New Construction / Moderate Rehab / Substantial Rehab mandatory-plus-optional criteria | Enterprise Green Communities Plus — 3 points |
| National Green Building Standard (NGBS) | Silver, Gold, or Emerald | Green+ Zero Energy — 3 points |
| USGBC LEED | Silver, Gold, or Platinum | LEED Zero Energy — 3 points |
| Guiding Principles for Sustainable Federal Buildings (Native American housing only) | Core Criteria + 50% (Rehab) or 75% (New Construction) Non-Core Criteria | Core + 90% Non-Core Criteria — 3 points |
| PHIUS+ (stackable add-on) | Not a standalone threshold option | PHIUS+ Certification paired with any threshold option above — 4 points total |
MSHDA Energy Efficient Building (EEB) Policy (Combined Application, Tab M). Certification is required to be identified at Application, documented again at 10% Certification, and confirmed at Placed in Service — a three-checkpoint compliance chain, not a one-time application-stage certification.
The two tiers connect to a third mechanism: MSHDA's State-Designated Basis Boost list (Exhibit V) separately grants a 9% project up to a 30% basis boost for "Energy Efficient Buildings - Projects that meet the requirements for points in the MSHDA Energy Efficient Buildings Policy" — meaning a project that clears the scored (not just the threshold) EEB tier can also pick up basis-boost eligibility on that same achievement. The same basis-boost list separately and independently rewards projects that are "subject to Davis-Bacon or BABA requirements" with the same up-to-30% boost — a detail that matters directly for the labor discussion below.
Labor: a repealed 1965 wage law, a narrower 2023 replacement, and Davis-Bacon riding in on HOME dollars
Michigan's original prevailing wage statute — 1965 PA 166, codified at MCL 408.551 to 408.558 — was repealed outright, not merely amended, effective June 6, 2018. The repeal came through 2018 PA 171, an indirect citizen-initiated statute: a petition drive gathered enough valid signatures to force a direct up-or-down vote in the Legislature under Article 2, §9 of the 1963 Michigan Constitution, and the Legislature adopted the repeal itself on June 6, 2018 rather than sending it to the November ballot — a vote the Governor at the time could not veto, since Michigan's constitution does not give the Governor veto power over a legislature-adopted citizen initiative.
A prevailing-wage requirement returned in 2023, but not as a reenactment of the old law. 2023 PA 10, titled "Prevailing Wages on State Projects" and codified starting at MCL 408.1101, took effect February 13, 2024, and was amended by 2024 PA 110 (adding coverage for large-scale energy facility projects), effective April 2, 2025. This is a new statute under new MCL numbering (Chapter 408, sections 1101 forward) — not the old 1965 Act (MCL 408.551 forward) restored to the books.
The scope of the 2023 law matters more than its existence. Section 1 defines a "state project" as, in relevant part, "new construction, alteration, repair, installation, painting, decorating, completion, demolition, conditioning, reconditioning, or improvement of public buildings, schools, works, bridges, highways, or roads" that is both "authorized by a public contracting agent" and "sponsored or financed in whole or in part by this state" — or, separately, a qualifying large-scale energy facility project. A "public contracting agent" is defined as "an officer, school board, board or commission of this state, or state institution supported in whole or in part by funds from this state, authorized to enter into a contract for a state project." Section 2 reinforces this: the prevailing-wage requirement attaches to "every contract executed between a contracting agent and a successful bidder... entered into pursuant to advertisement and invitation to bid for a state project" — the language of a public procurement process, not a private construction contract.
On the plain text of that definition, a privately owned LIHTC apartment development — built under a construction contract between a private developer/owner and a private general contractor, not put out to public bid by a state officer or board — does not appear to be a "public building" authorized by a "public contracting agent," even where MSHDA (a state agency) is financing the deal with tax-exempt bonds, a direct loan, LIHTC, or the new state Housing Opportunity Tax Credit. This is this research's own reading of the statutory definitions in MCL 408.1101, not a conclusion confirmed by MSHDA guidance, an Attorney General opinion, or case law addressing a Michigan LIHTC project specifically — confirm with counsel before relying on it for a specific deal. That reading is at least consistent with how MSHDA's own QAP treats the subject: the State-Designated Basis Boost list treats being "subject to Davis-Bacon or BABA requirements" as a voluntary, boost-worthy achievement (Exhibit V, item 10) rather than as a baseline condition every MSHDA-financed project already meets — which would be an odd incentive to offer if 2023 PA 10 already bound every MSHDA deal automatically.
None of that makes a Michigan LIHTC job automatically wage-mandate-free. Federal Davis-Bacon requirements attach independently, and automatically, once a project crosses the federal HOME threshold: 24 C.F.R. §92.354(a)(1) requires Davis-Bacon prevailing-wage provisions in every construction contract for a project with 12 or more HOME-assisted units, and that trigger reaches the entire project's construction once tripped — not just the HOME-funded units or cost lines. That threshold connects directly back to the financing-election discussion in Phase 4: MSHDA's HOME/MRF Gap Financing Program (which, as described there, structurally pairs with tax-exempt-bond 4% deals) and the PSH Gap Financing Program (partly funded by HOME-ARP) are exactly the kind of HOME-fund layering that can trip the Davis-Bacon threshold on a Michigan deal that would otherwise carry none. A 9% deal that never touches HOME or NHTF dollars is, by this same logic, less likely to carry any prevailing-wage obligation at all — state or federal — unless it voluntarily takes one on for the basis-boost incentive.
As general labor-law context: Michigan also repealed its own right-to-work law for private-sector employees, via 2023 PA 8, effective February 13, 2024 — the same effective date as the reinstated prevailing-wage statute. This is unrelated to prevailing wage specifically but is worth knowing as background for any Michigan construction labor discussion.
Where this goes wrong
- Assuming Michigan borrows a HUD- or CTCAC-style flat per-unit cost table — MSHDA instead multiplies the Engineering News-Record Construction Cost Index by a 36x or 33x conversion factor depending on project type and location, a formula that moves with national construction-cost inflation rather than being administratively reset by MSHDA each year.
- Treating Cost Reasonableness with Credit Efficiency as an optional or bonus-only scoring item — the Scoring Criteria's own section header states it is "Mandatory for All Projects," and coming in above the safe harbor actively subtracts points rather than simply forfeiting them.
- Assuming the credit-efficiency safe harbor is a flat number — it is building-type-specific (New Construction / Preservation-Existing / Vacant Uninhabitable Rehab-Adaptive Reuse), bedroom-weighted into an "Effective Unit Count," and rebased on the prior five years' inflation-adjusted average, so the target moves from round to round as MSHDA updates the underlying data.
- Relying on a single number for a blended-building-type project's Cost Reasonableness cap — MSHDA's own 2026-2027 Scoring Criteria states both a 5-point "Possible Points" figure and, separately, a "maximum of 8 points" for weighted-average blended scores; this research could not resolve which governs. Confirm directly with MSHDA before assuming either number.
- Assuming General Requirements, Builder Overhead, and Builder Profit are one combined 6% limit — they are three separate caps (6%/2%/6%), each computed exclusive of the other two, together reaching as much as 14% of construction costs.
- Assuming the developer fee formula simply favors 4%/bond deals over 9% deals across the board — the richer 20%-of-other-costs tier applies only to bond deals of 49 units or fewer; a 50-unit-plus bond deal uses the same 15% figure a 9% deal does, so fee sizing depends on unit count and category together, not a blanket 4%-beats-9% rule.
- Treating Michigan's Energy Efficient Building Policy as either purely mandatory or purely a scoring bonus — it is both: every applicant must clear a baseline certification tier as a threshold requirement, and a higher tier of the same certification (plus an optional PHIUS+ add-on) earns up to 4 QAP points and separately qualifies the project for the state-designated basis boost.
- Assuming Michigan's reinstated prevailing-wage law (2023 PA 10) automatically reaches MSHDA-financed LIHTC construction the way the old 1965 Act might have — 2023 PA 10's own "state project" definition is limited to public buildings authorized by a "public contracting agent" (a state officer, board, or state-funded institution) through a public bid process; a privately owned LIHTC development contracted between a private developer and a private general contractor does not appear, on the statute's own text, to meet either element. This is this research's own reading, not a conclusion confirmed by MSHDA, the Attorney General, or case law on point — confirm with counsel.
- Assuming a Michigan LIHTC deal has zero prevailing-wage exposure because of the above reading — federal Davis-Bacon applies independently and automatically once a project crosses 12 HOME-assisted units (24 C.F.R. §92.354(a)(1)), reaching the entire project's construction, not just the HOME-funded units; MSHDA's own HOME/MRF and PSH Gap Financing Programs are exactly the kind of HOME-fund layering that can trip this threshold.
- Confusing the original, fully repealed 1965 Prevailing Wage Act (1965 PA 166, MCL 408.551-408.558, repealed by 2018 PA 171) with its 2023 replacement — 2023 PA 10 (MCL 408.1101 et seq., effective Feb. 13, 2024, amended by 2024 PA 110) is a new, differently scoped statute under different MCL numbering, not the old law reenacted.
- HUD
- LIHTC
- State QAPs
- IRS § 42
- Housing Finance Agencies