"Virginia Housing publishes one flat statewide per-unit cost cap with no waiver process at all, caps builder's overhead, profit and general requirements at a single blended 14%, and its 2020 prevailing-wage law turns out to explicitly exempt its own housing-finance contracts. Do I actually have any prevailing-wage exposure on this deal, and what happens if my hard costs come in over the cap with no appeal available?"
One flat statewide cost cap, not a geographic table, and no waiver process at all
The QAP itself frames Virginia's cost limits as something meant to vary by geography: "The authority will at least annually establish per-unit and per-square-foot cost limits based upon historical cost data of tax credit developments in the Commonwealth... The cost limits will be established for new construction, rehabilitation, and adaptive reuse development types. The authority will establish geographic limits" (13VAC10-180-50 C). But the actual published 2026 cost-limit table this research found in Virginia Housing's own Housing Tax Credit Manual is a single flat statewide figure, with no geographic breakout of any kind — a genuine gap between what the QAP's text contemplates and what Virginia Housing has actually published for 2026, at least in the documents reviewed for this research.
| Basis | New Construction | Rehabilitation |
|---|---|---|
| Per square foot | $589 | $417 |
| Per unit | $589,015 | $504,522 |
Virginia Housing, Housing Tax Credit Manual (1/1/2026), Section 4.B, "2026 Cost Limits." An applicant may use whichever of the two calculations (per-unit or per-square-foot) is higher; land value, acquisition costs, and "such other expenses as the executive director determines are appropriate for the good of the plan" are excluded from the total development cost figure being tested.
The consequence of exceeding that limit is stated once, flatly, with no exception carved out anywhere else in the QAP or manual found in this research: "Any application that exceeds the cost limits described in subsection B of this section shall be rejected from further consideration and shall not be eligible for any reservation or allocation of credits" (13VAC10-180-50 C). Unlike Georgia's cost-limit regime, which allows a documented waiver package for an over-limit Application, this research found no waiver provision, no appeal process, and no discretionary exception anywhere in Virginia's current QAP or Housing Tax Credit Manual for an Application that exceeds the stated cost limit. Compliance is checked twice — "both at the time of application and also at the time the authority issues the IRS Form 8609, with the higher of the two limits being applicable at the time of IRS Form 8609 issuance" — meaning a limit increase between Application and 8609 issuance benefits an already-reserved deal, but an Application that exceeds the limit at submission has no documented path to a waiver.
Virginia does something distinctive on the back end instead of offering a front-end waiver: it attaches a real, multi-year scoring penalty to a Principal whose actual construction costs overrun the limit after the fact. "This penalty will apply if the Application includes a Principal that was a Principal in a development for which the actual cost of construction exceeded the applicable cost limit by 5% or more (-50 points for a period of 3 calendar years beginning January 1 of the year following the completion of the cost certification). If the Board of Commissioners determines that exceeding the cost limit by more than 5% was outside the applicant's control based upon documented extenuating circumstances, then no negative points" (Section 6.11.7). That is the only documented relief valve found in this research for a cost overrun — and it operates only after the fact, at cost certification, and only as a discretionary Board waiver of the penalty rather than a waiver of the underlying cost limit itself.
Developer fee: a declining sliding scale plus flat-dollar ceilings a 2027 rewrite calls "artificial"
Virginia's manual runs the developer fee through several parallel calculations at once and takes whichever produces the lowest number. The base calculation splits by cost category: "Acquisition: Less than or equal to 10% of the building's acquisition cost, excluding the developer's fee... PLUS Rehab: Less than or equal to 25% of the building's eligible basis arising from the rehab... OR New Construction: Less than or equal to 20% of the building's eligible basis" — separately capped at "15% of the total development costs" overall (Section 6.4.1-6.4.2). Identity-of-interest relationships with the contractor or architect trigger further reductions (Section 6.4.3-6.4.5), and acquisition fee drops to 8% specifically for Rural Development deals, with no acquisition fee allowed at all where an identity of interest exists between buyer and seller absent a pre-Application waiver from Virginia Housing.
On top of those percentage-of-basis calculations, Section 6.4.6 layers a separate, size-based declining scale: "15% if less than $1 million total development costs, plus 12% if between $1 million and $10 million total development costs, plus 8% if greater than $10 million total development costs" — a cumulating formula, not a single applicable bracket, so a large deal's fee is built up in pieces across all three tiers rather than governed by whichever tier its total falls into.
| Ceiling | Amount | Condition |
|---|---|---|
| Fee includible in eligible basis, 9% deals | $3,000,000 maximum | No condition |
| Fee includible in eligible basis, 4% deals | $3,000,000 maximum | Unless at least 30% of the fee is deferred |
| Absolute developer fee ceiling | $5,000,000 maximum | Applies regardless of credit type |
| Total development cost ceiling | 15% of TDC maximum | Applies regardless of credit type |
Housing Tax Credit Manual (1/1/2026), Section 6.4, final paragraph. The fee "cannot increase after Reservation without prior approval."
Virginia Housing's own 2027 Summary of Proposed Changes targets exactly these flat-dollar figures for removal, while explicitly preserving the percentage-based structure underneath them: "Developer Fee Policy Update: The artificial cap on the developer fee — both total fee and basis-eligible fee — will be removed. The existing sliding-scale methodology for determining the maximum allowable fee will remain in place." Read against the current manual, "the artificial cap" most plausibly refers to the $3 million eligible-basis ceilings and the $5 million absolute ceiling described above, since those are the only flat-dollar figures layered on top of the percentage- and sliding-scale-based calculations that the same summary says will remain. This research found no more specific definition of "artificial cap" in the documents reviewed, so a sponsor modeling a 2027 deal should treat the flat-dollar ceilings as likely — but not yet confirmed — to disappear, while planning on the acquisition/rehab/new-construction percentage caps and the 15%/12%/8% sliding scale continuing to apply.
Builder's overhead, profit, and general requirements: one blended 14 percent, not three separate caps
Virginia's manual states this cap as a single combined figure rather than breaking it into separate profit, overhead, and general-requirements lines the way this guide has documented in other states: "In total, the combined amount included in basis (including any change orders) must not exceed 14% of total structures and land as shown in the application" (Section 6.3.8). There is no further breakdown in the QAP or manual reviewed for this research specifying how much of that 14% may be profit versus overhead versus general requirements individually — the ceiling applies to the sum, not to each component separately.
That is a materially different structure from a state that caps builder's profit, overhead, and general requirements as three independent lines that can together exceed a much higher combined percentage — modeling Virginia's 14% as if it were only one of three separate line-item caps (rather than the ceiling on their sum) would overstate the contractor-side budget available under the QAP.
Green building and accessibility: a mandatory baseline written inside the scoring section, and a standard on its way out
Virginia's baseline energy standard sits inside the QAP's scored development-characteristics list, but its own wording reads as an unconditional requirement rather than a scoring option: "Each development must meet the following baseline energy performance standard applicable to the development's construction category. For new construction, the development must meet all requirements for EPA Energy Star certification. For rehabilitation, the proposed renovation... must result in at least a 30% post-rehabilitation decrease on the Home Energy Rating System Index (HERS Index) or score an 80 or lower on the HERS Index. For adaptive reuse, the proposed development must score a 95 or lower on the HERS Index" — verified by an independent, RESNET-certified rater. Unlike every other lettered item in the same scoring list, this baseline is phrased with "must," not "if," and carries no stated point value of its own; read against the rest of the list, that phrasing indicates every Application is expected to meet the baseline standard regardless of whether it is chasing any of the points that follow, even though the requirement sits inside the QAP's scoring section rather than a separately labeled Threshold section.
Going beyond that baseline is where the actual points sit, and they are structured in two independent tiers. A one-time, non-cumulative 10 points is available for committing to "EarthCraft Gold or higher certification; U.S. Green Building Council LEED green-building certification; National Green Building Standard Certification of Silver or higher; or... Enterprise Green Communities Criteria" prior to 8609 issuance, architect-certified at Application. Separately, a cumulative 10 points is available "on future applications" to an applicant with a Principal already meeting, on a different Virginia tax credit development, either "the Zero Energy Ready Home Requirements as promulgated by the U.S. Department of Energy" or "the Passive House Institute's Passive House standards" — a track-record-based incentive tied to the Principal's completed work elsewhere in the Commonwealth, not to the current Application's own design.
Accessibility currently runs on the Uniform Federal Accessibility Standards (UFAS): the QAP's HUD 504 accessibility scoring item awards 20 points where "10% of the units... conform to HUD regulations interpreting the accessibility requirements of § 504 of the Rehabilitation Act... permanently accessible according to the Uniform Federal Accessibility Standards." Virginia Housing's own 2027 Summary of Proposed Changes lists "Accessibility Standard Update: ANSI A117.1 Type A will replace UFAS as the required standard for accessibility points" — a standard that this research did not further verify inside the 2027 draft QAP's own operative text (unlike the mandatory Average Income Test change, which appears consistently in both documents), so confirm the actual 2027 QAP language directly before assuming the ANSI A117.1 switch has been finalized exactly as summarized.
Labor: a real 2020 prevailing-wage statute that explicitly exempts Virginia Housing's own contracts
Virginia is not a state with no prevailing-wage statute at all — it enacted one in 2020 (2020, cc. 1216, 1243, reenacted 2021 Sp. Sess. I, c. 549, and amended again in 2026), codified at Code of Virginia § 2.2-4321.3, replacing what had previously been a state-law prohibition on prevailing-wage requirements. The current statute is a two-tier system, not a single blanket mandate: subsection B requires, without local opt-in, that "each state agency, when procuring services or letting contracts for public works paid for in whole or in part by state funds... shall ensure that its bid specifications or other public contracts... require... payment... at the prevailing wage rate"; subsection C separately authorizes, but does not require, "any locality" to "adopt an ordinance" applying the same requirement to contracts "paid for in whole or in part by funds of the locality." Both thresholds are bounded the same way: "the provisions of this section shall not apply to any public contract for public works of $250,000 or less" (subsection N).
The clause that answers whether any of this reaches a Virginia Housing-financed LIHTC construction contract is subsection E, and it is direct: "Notwithstanding any other provision of this chapter, public contracts entered into by the Department of Housing and Community Development (DHCD) or the Virginia Housing Development Authority (HDA) for the funding or financing of housing developments for low-income or moderate-income individuals under qualification criteria established by DHCD or HDA and public contracts entered into by HDA paid for in whole or in part by funds other than state appropriated funds shall not be subject to the requirements of this chapter." Read plainly, that exempts two overlapping categories that between them cover essentially all LIHTC-financed construction in Virginia: any DHCD or Virginia Housing contract that funds or finances low- or moderate-income housing under the agencies' own qualification criteria, and separately, any Virginia Housing contract paid for with anything other than state-appropriated funds — which describes Virginia Housing's own bond-financed and fee-based operations generally, since Virginia Housing is a self-supporting authority that does not rely on state general-fund appropriations for its housing finance activity.
That means the task's threshold framing — a locality deciding whether to opt in to a prevailing-wage ordinance — is the wrong question for a Virginia Housing-financed LIHTC construction contract specifically: subsection E removes it from the statute's reach before the state-agency/local-ordinance distinction in subsections B and C would even come into play. A locality's own construction contracts (for a separately locally-funded public building, for instance) remain governed by subsections B and C in the ordinary way; a Virginia Housing 9% or 4% credit reservation, and the construction contract it finances, is carved out by name.
None of that touches federal Davis-Bacon, which applies independently of Virginia law whenever HOME funds are layered into the capital stack: 24 C.F.R. § 92.354 requires Davis-Bacon prevailing wages on "the construction of nonfederal buildings or work (except housing) financed in whole or part with assistance provided under this part" — for HOME specifically, the trigger is a project of "12 or more units assisted with HOME funds," reaching the entire project's construction once triggered, not merely the HOME-assisted units. National Housing Trust Fund (NHTF) funds behave differently and should not be assumed to carry the same trigger: per HUD's own published guidance, Davis-Bacon labor standards do not apply to NHTF-financed developments at all, because the statute establishing the Housing Trust Fund — Section 1131 of the Housing and Economic Recovery Act of 2008, Pub. L. 110-289 — did not extend Davis-Bacon's labor standards to the program the way the HOME statute does. A deal layering both HOME and NHTF funds should model Davis-Bacon as triggered by the HOME dollars and the 12-unit HOME threshold specifically, not by the mere presence of federal subsidy generally.
Virginia is also a right-to-work state, under a statute considerably older than its 2020 prevailing-wage law: Code of Virginia § 40.1-59 (part of Article 3, "Denial or Abridgement of Right to Work," Chapter 4 of Title 40.1) makes an agreement conditioning employment on union membership unlawful, with companion sections barring an employer from requiring union membership (§ 40.1-60), requiring abstention from union membership (§ 40.1-61), or compelling payment of union dues as a condition of employment (§ 40.1-62). That is general labor-law context distinct from prevailing wage specifically, but relevant to the same construction-labor package a GC is pricing.
Where this goes wrong
- Assuming Virginia's published cost limits vary by geography the way the QAP's own text ("the authority will establish geographic limits") suggests they should — the actual 2026 cost-limit table published in the Housing Tax Credit Manual is a single flat statewide figure with no geographic breakout found in this research.
- Assuming an over-limit Application has a waiver path — unlike states that publish a documented cost-limit waiver process, Virginia's QAP states flatly that an over-limit Application "shall be rejected from further consideration," with no waiver, appeal, or exception provision found anywhere in the QAP or manual reviewed for this research.
- Treating the 5%-cost-overrun scoring penalty (Section 6.11.7) as a substitute for a front-end waiver — it applies only after the fact, at cost certification, only to a Principal's future Applications (a 3-year, -50-point penalty), and only avoids application if the Board of Commissioners specifically finds the overrun was outside the applicant's control on documented extenuating circumstances; it does nothing for the Application that actually exceeded the limit.
- Modeling the $3 million eligible-basis fee cap or the $5 million absolute fee cap as fixed features of Virginia's program going forward — Virginia Housing's own 2027 Summary of Proposed Changes describes removing "the artificial cap on the developer fee — both total fee and basis-eligible fee" while keeping the percentage-based sliding scale; confirm the actual 2027 QAP text before assuming either the removal or its exact scope.
- Treating Virginia's 14% builder's overhead/profit/general-requirements cap as comparable to a state that caps each of those three components separately — Virginia's Section 6.3.8 caps their combined sum at 14% of total structures and land, not each line individually.
- Reading the QAP's mandatory-sounding "must meet" baseline energy standard (EPA Energy Star for new construction; HERS Index thresholds for rehabilitation and adaptive reuse) as merely one more scoring option because it sits inside the scored development-characteristics list — its own wording is unconditional, unlike every other item in that list, and carries no point value of its own.
- Assuming Virginia has no prevailing-wage law at all because Virginia Housing-financed contracts are exempt from it — Virginia enacted a real prevailing-wage statute in 2020 (Code of Virginia § 2.2-4321.3) that is mandatory for state-agency-funded public works over $250,000 and optional, by local ordinance, for locality-funded public works over the same threshold; it is subsection E's specific carve-out for DHCD/Virginia Housing housing-finance contracts that removes LIHTC construction from its reach, not the statute's absence.
- Assuming National Housing Trust Fund dollars trigger Davis-Bacon the same way HOME dollars do at the 12-unit threshold — per HUD's own guidance, Davis-Bacon does not apply to NHTF-financed developments at all, because the Housing and Economic Recovery Act of 2008 (Pub. L. 110-289, § 1131) never extended it to that program.
- Assuming the 2027 QAP's proposed switch from UFAS to ANSI A117.1 Type A for accessibility scoring is already settled — this research confirmed it in Virginia Housing's own Summary of Proposed Changes but did not independently verify matching language in the 2027 draft QAP's own operative text the way it did for the mandatory Average Income Test change.
- HUD
- LIHTC
- State QAPs
- IRS § 42
- Housing Finance Agencies