"THDA caps contractor and developer fees the same way most QAPs do, but does it cap my total per-unit development cost the way some states do, does 'green building' actually require a certification, and do I really have zero prevailing-wage exposure on a Tennessee LIHTC build?"
Total Development Cost: a hard per-unit cap for bond deals, a statistical flag for competitive ones
The two federal credit tracks treat Total Development Cost (TDC) very differently. On the competitive 9% side, the QAP imposes no fixed per-unit dollar ceiling — instead, "THDA will determine which new construction proposals show total development cost ('TDC') per unit amounts outside one standard deviation from the average TDC per unit of development proposals across the state, and require applicants for all such proposals to provide explanations for the deviation," with an unsatisfactory explanation potentially disqualifying the application (Section 11.F). That is a statistical review trigger, not a hard cap — a genuinely high-cost site can still be funded if THDA accepts the explanation.
The noncompetitive (bond/MTBA) side is different: "Initial Applications for Housing Credit must propose Total Development Costs that do not exceed the applicable amount in Table 22–2" (Section 22.E), with land cost, cost of issuance, and any deferred developer fee above 15% excluded from the calculation. That table sets a genuine hard per-unit ceiling, broken out by Urban/Suburban/Rural location, by building type (Detached/Semi-detached, Row House, Walkup, Elevator), and by bedroom count.
| Location / Type | 1 BR | 2 BR | 3 BR | 4 BR | 5 BR |
|---|---|---|---|---|---|
| Urban — Elevator | $248,400 | $319,200 | $426,000 | $531,600 | $602,400 |
| Urban — Walkup | $237,600 | $301,200 | $396,000 | $489,600 | $552,000 |
| Suburban — Elevator | $197,000 | $254,000 | $405,600 | $507,600 | $574,800 |
| Rural — Walkup | $216,000 | $273,600 | $360,000 | $445,200 | $501,600 |
| Rural — Detached/Semi-detached | $267,600 | $320,400 | $381,600 | $448,800 | $490,800 |
Full table has 12 location/type combinations (Urban, Suburban, and Rural, each split into Detached/Semi-detached, Row House, Walkup, and Elevator). Applies only to Noncompetitive (bond-financed) Initial Applications under Section 22; competitive 9% applications are instead subject to the one-standard-deviation review under Section 11.F, not this table. Land cost excluded from the TDC calculation for this purpose.
Developer, consultant, and contractor fee caps — the same architecture on both tracks, with an added MTBA-only ceiling
Both Section 11 (competitive) and Section 22 (noncompetitive) apply the identical fee structure. Where the developer and contractor are unrelated parties, "the combined total of Developer and Consultant fees... cannot exceed 15% of that portion of THDA determined eligible basis attributable to acquisition... and cannot exceed 15% of that portion... attributable to new construction or to rehabilitation" (Section 11.G.1). Where the developer and contractor are related persons under IRC §42(d)(2)(D)(iii), the combined developer, consultant, and contractor profit/overhead/general-requirements fees are capped at 15% of acquisition basis but a more generous 25% of new construction or rehabilitation basis (Section 11.G.2).
| Fee component | Cap |
|---|---|
| Contractor Profit | ≤6% |
| Contractor Overhead | ≤2% |
| Contractor General Requirements (including payment and performance bonds) | ≤6% |
| Total Contractor Fees | ≤14% |
Applied to total site work costs plus accessory buildings plus new-building or rehabilitation hard costs (Section 11.H.1; Section 22.D).
MTBA/noncompetitive deals carry one additional overall ceiling not stated on the competitive side: the 2026 MTBA Program Description caps the sum of developer and consultant fees at "25% of total development costs (less cash reserves and the claimed developer fee)" (MTBA PD Section 5.D.1), and requires any fee amount above what the related/unrelated-party rules allow to be reflected as a deferred fee, documented with repayment terms and evidence the deferral won't jeopardize feasibility (MTBA PD Section 5.D.2, 5.D.5-7). A Basis Boost of "up to 30% in eligible basis... to improve the financial feasibility of the building in a difficult to develop area" is available on either track at THDA's sole discretion (Section 2, Definitions; Section 11.I) — it is scoped to HUD-designated Difficult Development Areas, not available generally.
Prevailing wage: Tennessee has one, but it doesn't reach your apartment building
This is more nuanced than "Tennessee has no prevailing wage law." The U.S. Department of Labor's own current state-by-state list places Tennessee among the states with a prevailing wage law — but describes its actual scope narrowly: a $50,000 contract threshold, "but only for highway construction. No prevailing wage on non-highway construction." The underlying statute confirms that scope in its own title: Tennessee Code Annotated Title 12, Chapter 4, Part 4 is captioned the "Prevailing Wage Act for State Highway Construction Projects" (§§12-4-401 to 12-4-415) — horizontal infrastructure, not buildings.
Vertical (building) construction was carved out separately: Tennessee's prior prevailing-wage mandate on state building projects was repealed by S.B. 1209, signed April 30, 2013, effective January 1, 2014, which eliminated the state wage mandate and mandatory certified payrolls on public building construction, leaving only horizontal (highway) projects subject to the requirement going forward. Consistent with that, this research found zero prevailing-wage or certified-payroll references anywhere in the 2026 QAP's text — THDA imposes no state labor-wage requirement on a Tennessee LIHTC apartment build on its own.
That is a state-law conclusion only, and it does not extend to federal subsidy layered on top. Federal Davis-Bacon prevailing wage attaches independently, by federal regulation, whenever HOME Investment Partnerships funds are part of the capital stack on a project of 12 or more HOME-assisted units (24 C.F.R. §92.354) — a common pairing with 9% or 4% LIHTC deals in Tennessee, as elsewhere — and National Housing Trust Fund regulations layer in comparable federal labor-standards coverage of their own (24 C.F.R. Part 93, Subpart I). A Tennessee developer combining LIHTC with HOME or NHTF gap financing should assume Davis-Bacon applies to that portion of the deal regardless of the state's own narrow, highway-only prevailing wage law.
Where this goes wrong
- Applying the Table 22-2 per-unit Total Development Cost caps to a competitive 9% application — that table binds only bond-financed Noncompetitive (MTBA) deals under Section 22; a 9% deal instead faces a one-standard-deviation statistical flag under Section 11.F, which can be explained away rather than a hard ceiling.
- Assuming the 25%-of-basis related-party developer/consultant/contractor fee cap is always available — it applies only when the developer and contractor are related persons under IRC §42(d)(2)(D)(iii); unrelated parties are capped at 15% on both acquisition and new construction/rehabilitation basis.
- Missing the MTBA-specific overall fee ceiling — bond-financed deals face an additional 25%-of-total-development-cost cap on combined developer and consultant fees (MTBA PD Section 5.D) that has no stated parallel on the competitive 9% side.
- Treating THDA's Basis Boost as available to any applicant that asks — it is scoped, by the QAP's own definition, to buildings in a HUD-designated Difficult Development Area, awarded at THDA's sole discretion, not a general basis increase.
- Assuming the ENERGY STAR "Energy Efficiency" scoring category requires a green building certification — it doesn't; it's an itemized, optional, up-to-10-point appliance/systems menu, with no LEED, EarthCraft, or National Green Building Standard mandate found anywhere in the 2026 QAP.
- Saying "Tennessee has no prevailing wage law" without qualification — DOL's own current list still shows Tennessee with a prevailing wage law; it is real, just scoped exclusively to state highway construction over $50,000 (T.C.A. Title 12, Ch. 4, Pt. 4) since vertical/building construction was exempted by 2013's S.B. 1209.
- Assuming that narrow state-law exemption means zero labor-standards exposure on a subsidy-layered deal — federal Davis-Bacon attaches independently and automatically once HOME funds cover 12 or more units (24 C.F.R. §92.354) or National Housing Trust Fund dollars are part of the stack (24 C.F.R. Part 93), regardless of Tennessee's own highway-only prevailing wage law.
- Assuming a written request for a Total Development Cost or MTBA-amount exception is close to automatic — the QAP and MTBA PD both limit an applicant to one such written exception request per application, granted or denied entirely at THDA's sole discretion.
- HUD
- LIHTC
- State QAPs
- IRS § 42
- Housing Finance Agencies