Construction type, cost caps, and wages — Ohio

Two cost-containment tables, not one — and the 9% caps run tighter

OHFA sets Total Development Cost (TDC) limits to satisfy the federal requirement at 26 U.S.C. §42(m)(2)(B)(iv) and 26 C.F.R. §1.42-17(a)(3)(iv) that a housing credit agency not allocate more credit than a project needs to be financially feasible. The methodology is data-driven: OHFA maintains a rolling five-year database of LIHTC Final Application cost submissions, tracked per unit and per gross square foot (GSF), adjusts them using the BLS Producer Price Index series for Net Inputs to Multifamily Residential Construction (WPUIP2311201, indexed to December 2014), then applies an outlier method — 1.5 times the interquartile range — to set the maximum allowable cost in each construction-type and geography category.

The 9% and 4% programs publish separate tables, on separate dates, with materially different dollar figures for what look like matching categories. Applicants must use whichever TDC/unit and TDC/GSF caps most closely align with their project type, and must meet both the per-unit and per-square-foot cap — meeting one and missing the other still fails compliance.

The gap is real and directional: a Metro new-construction 9% deal caps out around $390,284/unit, roughly $65,000/unit tighter than the equivalent 4% category at $455,000/unit. A 9% deal has less room to absorb a construction-cost overrun before it needs an Underwriting Exception Request — and OHFA will only consider those exceptions for a short, named list of reasons: larger unit sizes, less common space, scattered-site development, use of Federal Historic Tax Credits, or Davis-Bacon wage rates. That last item is the direct link to the labor-cost section below — OHFA treats federally-mandated wage premiums as a legitimate, documentable driver of higher cost, not an assumption to be waved off.

Minimum rehab floors stack, contractor fees are capped separately

Below the TDC ceiling sits a rehab construction-cost floor, and it has two layers. OHFA's general Multifamily Rental Underwriting Guidelines set a program-wide minimum rehabilitation hard construction cost of $60,000/unit for 2026 (also indexed annually to the Multifamily Residential Construction Index), with an exception process for projects whose scope genuinely can't reach it. The 9% QAP layers a higher, pool-specific floor on top: Preserved Affordability pool projects must hit a minimum rehabilitation hard construction cost of $85,000/unit. (The QAP's own rationale text frames that $85,000 figure as sitting 'beyond the minimum $40,000 per unit' — a baseline the QAP doesn't itself define in the text available; don't treat $40,000 as a separately citable current standard without confirming its source.)

Hard construction cost contingency is capped as a percentage of Hard Construction Costs net of the contingency itself, and the cap varies by construction type: a maximum of 5% for new construction, 10% for rehabilitation, and 15% for adaptive reuse (minimums of 2.5%, 5%, and 7.5% respectively). Contractor cost limits run separately: profit capped at 6% of Hard Construction Costs, overhead at 2%, and general requirements at 6% — a combined ceiling OHFA will consider extending to 14% for non-related-party contractors, while related-party contracts get enhanced review on top of the caps. If the general contractor's final cost certification shows savings, OHFA splits them 50/50 with the developer on related-party contracts, or 67% to the developer on third-party contracts.

Ohio's prevailing wage isn't a LIHTC trigger — it's an OHTF/NHTF trigger

Ohio's prevailing wage law, Ohio Revised Code Chapter 4115, applies to 'public improvements' — defined at ORC 4115.03 as buildings and structures 'constructed by a public authority,' where a public authority is an officer, board, or commission of the state or a political subdivision, or an institution supported by public funds. A privately owned LIHTC ownership entity receiving federal tax credit equity is not itself a public authority. On that reading, a standalone LIHTC allocation — 9% or 4% — does not by itself pull a project into ORC 4115's scope.

It becomes a live, required question specifically when a deal also draws Ohio Housing Trust Fund (OHTF) or National Housing Trust Fund (NHTF) gap financing through OHFA's Bond Gap Financing program. OHFA's own BGF Guidelines make a formal wage-rate determination a required Final Application submission item: applicants seeking OHTF or NHTF resources must include a determination from the Ohio Department of Commerce — the agency that administers ORC 4115 — evidencing whether payment of State Prevailing Wages is triggered on that specific deal. Skipping that submission item isn't optional; it's checklist item #39 in the current BGF Guidelines.

Federal Davis-Bacon wage rates run on a completely separate test and can apply independently: under 24 C.F.R. §92.354(a)(2), any HOME-funded construction contract covering 12 or more HOME-assisted units must include Davis-Bacon wage provisions — and once triggered, Davis-Bacon applies to the whole project, not just the HOME-assisted units. A deal can face federal Davis-Bacon, Ohio's state prevailing wage, both, or neither, purely as a function of which gap-financing sources it layers in — the LIHTC allocation itself decides none of it.

ORC 4115.04(B) lists seven categories exempt from state prevailing wage even where a public authority is otherwise involved: certain federally-funded projects that already prescribe minimum wages, unpaid participants in state work programs, school districts and educational service centers, certain county/municipal hospitals without bond or tax-appropriation funding, specific economic development projects under ORC 176.05(D)(1)(a)-(e), port authorities under ORC 4582.01 or 4582.21, and work performed entirely with donated labor or materials. None of these is LIHTC-specific — for most LIHTC deals, the real 'exemption' is the structural one above (not being a public-authority project to begin with), not a listed statutory carve-out. Where ORC 4115 does apply, its current dollar thresholds (stepped up from their 2011 levels) require prevailing wage on new construction contracts of $250,000 or more, and on reconstruction, repair, or alteration contracts of $75,000 or more.