"VHFA caps builder's profit/overhead/general requirements and developer fee by formula but never publishes a per-unit or per-square-foot Total Development Cost ceiling the way some states do, its energy standard is a mandatory Efficiency Vermont threshold rather than a scored bonus, and Vermont has its own prevailing wage statute — does that law actually reach a typical LIHTC deal, or only state-owned construction?"
No published per-unit or per-square-foot cost cap — cost reasonableness is a comparative underwriting judgment
The QAP's own Costs threshold provision is deliberately unspecific about a numeric ceiling: "The Sponsor must agree to submit information related to the project's development budget, plans, and specifications to allow for a thorough analysis of project cost-effectiveness and reasonable use of public resources. VHFA staff, as a part of its underwriting, will compare available cost estimates with previous housing development cost data. VHFA's goal is to select developments whose value to a community justifies the costs of the project" (§3.15). This research found no VHFA-published numeric per-unit or per-square-foot Total Development Cost limit — unlike states that adopt HUD's 221(d)(4) cost limits or publish their own dollar table, Vermont's cost review is a comparative judgment against VHFA's own prior deals rather than a public formula a developer can check against in advance.
The Underwriting Standards describe the mechanics of that comparative review: "The construction budget and total development costs will be analyzed for reasonability for the project type, location, size, and proposed tenancy. The Agency will review both the cost-per unit and cost-per square footage." Construction contingency is bounded by range rather than a fixed percentage: "New construction contingency should be set at 4-5%, at the discretion of the Agency," while "Rehabilitation construction contingency should be set at 7-10%, at the discretion of the Agency."
Builder's profit, overhead, and general requirements: a 14% combined ceiling, unless the job is competitively bid
| Item | Limit | Basis |
|---|---|---|
| Builder's Profit | 6% of hard construction costs | QAP §3.16 |
| Builder's Overhead | 2% of hard construction costs | QAP §3.16 |
| General Requirements | 6% of hard construction costs | QAP §3.16 |
"These limits will not apply for projects that are competitively bid, whether through open public bidding or selective bidding. The bid process will determine the amount of builder's profit, builder's overhead, and general requirements. The developer must make best efforts to obtain at least three competitive bids; documentation of the bid process must be provided." For Rural Development 515 projects, RD's own cost containment guidelines govern instead. VHFA's separately published Underwriting Standards state the identical 6%/2%/6% figures (p. 14), an internally consistent cross-check between the two documents.
Developer fee: a sliding Total Development Cost percentage with its own cash cap and deferral incentive
| Project size / type | Fee formula | Cash cap |
|---|---|---|
| ≤60 units | 12% of Total Development Cost | $1,000,000 (standard) |
| ≤60 units, with deferral | 15% of TDC if at least one-third of the fee (min. $100,000) is deferred | $1,000,000 (standard) |
| >60 units | 10% of TDC | $1,000,000 (standard) |
| Hybrid Development or Bond Credit deal | Same formula as above | Up to $1,500,000 |
| Refinance / recapitalization / workout of an existing portfolio project | ≤15% of hard construction cost (incl. contingency) | N/A |
| Arm's-length acquisition with substantial construction work | ≤12% of TDC (excl. fee itself and capitalized cash accounts) | N/A |
| Arm's-length acquisition without substantial construction work | ≤15% of hard construction cost (incl. contingency) | N/A |
QAP §3.16. "Substantial construction work" means construction eligible basis (less developer's fee and consultant fees) exceeds acquisition eligible basis plus land cost. Deferred-fee term ≤10 years; interest capped at the long-term Applicable Federal Rate published monthly by the IRS in the month the deferred-fee note is executed.
The QAP's own worked example shows the mechanics at the small end: a 20-unit, $5,000,000 TDC new-construction/acquisition-rehab project at 12% TDC produces a $600,000 developer fee with no deferred portion; a 39-unit, $9,750,000 TDC project at 15% TDC produces a $1,462,500 fee with $487,500 deferred and $975,000 paid in cash; a 61-unit, $15,250,000 TDC project at 10% TDC produces a $1,525,000 fee with $525,000 deferred and the full $1,000,000 cash cap paid at closing. The fee is fixed once agreed at Reservation Certificate/Binding Rate Agreement (or Carryover Allocation, if no such agreement is issued) and "the Allocating Agency will not recognize any increases to the fee, whether total development costs increase or decrease," absent a substantial project change such as an altered unit count. A project that later receives Supplemental Enhancement Pool credits after unforeseen cost increases specifically may not use that increase to raise its developer fee.
Flag: this research reviewed a substantially restructured draft QAP, reviewed by the VHFA Board on June 23, 2026 but not confirmed adopted, that would replace this entire percentage-of-TDC schedule with a flat cap — "$35,000 per LIHTC unit for new construction, or 15% of hard costs for rehabilitation (set at award)" — and would allow VHFA to withhold up to 35% of the fee until stated benchmarks are met. None of that is current policy as of this research; the schedule above, from the governing 2024-25 QAP, is what applies today.
Energy efficiency: a mandatory Efficiency Vermont performance standard, not a scoring bonus
Vermont's baseline energy requirement is not the QAP's optional Passive House/Net Zero scoring checkmark — it is a mandatory threshold item enforced through the joint VHCB/VHFA Building Design Standards policy, which the QAP incorporates as a threshold requirement (§3.14). That policy states: "All new construction and most substantial rehabilitation projects shall comply with Efficiency Vermont's (EVT) 2020 High-Performance Track Standards as updated and integrated into this policy." Rehabilitation projects that cannot meet that standard face a specific numeric fallback rather than a blanket exemption: "a maximum annual heating demand performance threshold of (4 BTU/SF/H DD)" and "a post rehab. blower door tested air sealing level of (.3 CFM50/sf. of surface area)," with case-by-case flexibility only "in cases when energy efficiency improvements are unreasonable given inflation-adjusted paybacks of exceptionally long duration."
Passive House and Net Zero sit above that mandatory floor as an optional scoring bonus, not a substitute compliance path: the QAP's Ceiling Credit evaluation criteria separately award "Projects that will be constructed to Passive House standards or Net Zero guidelines will receive one checkmark. Passive House projects require certification" (§4.2, item 12) — a single checkmark out of the full scoring system, and available only to Ceiling Credit applications, not to Bond Credits, which are not scored at all.
The same Building Design Standards policy layers in mandatory indoor-environmental requirements independent of the energy standard: "All projects must comply with EPA Indoor airPLUS sections 1 and 2" (moisture control and radon protection) and "all composite wood products, flooring, cabinetry, paints, stains, adhesives, windows, doors and other building materials in all projects must comply with EPA Indoor airPLUS section 6 Low-Emission Materials." Embodied-carbon practices (minimizing concrete, favoring wood framing, avoiding high-GWP foam insulation) are described as something design teams are "encouraged" to pursue, not a mandatory design requirement.
Vermont's own prevailing wage law: real, but narrowly triggered — confirm the funding stack before assuming either way
Vermont does maintain its own state prevailing wage statute, verified directly against Vermont's own Department of Labor and the statute text rather than assumed from a general multi-state list. Under 29 V.S.A. § 161(b): "Each contract awarded under this section for any State project with a construction cost exceeding $100,000.00, a construction project with a construction cost exceeding $200,000.00 that is authorized and at least 50 percent funded by a capital construction act pursuant to 32 V.S.A. § 701a, or a construction project with a construction cost exceeding $200,000.00 that is at least 50 percent funded by the Cash Fund for Capital and Essential Investments established in 32 V.S.A. § 1001b shall provide that all construction employees working on the project shall be paid not less than the mean prevailing wage published periodically by the Vermont Department of Labor in its occupational employment and wage survey plus an additional fringe benefit of 42 and one-half percent of wage." VDOL publishes a current rate schedule annually across three geographic areas — Northern Vermont, the Burlington-South Burlington NECTA, and Southern Vermont.
The trigger, read directly from the statute, is narrower than a blanket "affordable housing" or "LIHTC" rule: it reaches a State-owned construction project over $100,000, or any construction project over $200,000 that draws at least half its funding specifically from a Capital Construction Act appropriation (32 V.S.A. § 701a) or the Cash Fund for Capital and Essential Investments (32 V.S.A. § 1001b). This research could not confirm from a primary source whether a typical VHFA-financed LIHTC deal — financed through Ceiling or Bond Credits, VHFA bonds, and private equity, without a specific Capital Construction Act-appropriated state capital grant layered into at least half the construction cost — actually crosses that funding threshold. Do not assume either outcome; confirm the actual sources-and-uses against VDOL and bond/tax counsel on a deal-specific basis, particularly where a project also carries a Vermont Housing and Conservation Board capital grant that may itself trace back to a Capital Construction Act appropriation.
Separately, VHFA's own Underwriting Standards make clear the Agency does not impose one uniform wage rule of its own on every deal: "Various forms of state and federal funding may require developments to ensure compliance with HUD Section 3, Prevailing Wages, and/or Davis-Bacon. Applicants are required to certify their ability to monitor, document, and comply with all wage and employment requirements associated with the sources of funding for a project. VHFA may review records, require 3rd party review and verification of compliance, and/or require an owner certification of adherence to all wage and employment regulatory programs." In practice, federal Davis-Bacon is triggered independently whenever a project layers in HOME funds or National Housing Trust Fund dollars, regardless of whether Vermont's own state prevailing wage statute applies — the two triggers operate on separate tracks, and a deal can owe Davis-Bacon compliance through its federal funding sources even where 29 V.S.A. § 161(b) does not reach it at all.
Where this goes wrong
- Assuming VHFA publishes a per-unit or per-square-foot Total Development Cost ceiling the way many states do — this research found none; VHFA compares each project's costs against its own portfolio data at underwriting instead.
- Applying the 6%/2%/6% builder's profit/overhead/general requirements caps to a competitively bid contract — those caps apply only where there's an identity of interest or the contractor was not competitively selected; a documented three-bid process lets the bid itself set the number.
- Using a flat developer fee percentage across every deal type — the schedule varies by unit count, financing structure (Hybrid/Bond Credit deals get a $1.5 million cash cap instead of $1 million), and transaction type (refinance/recap, and acquisition with vs. without substantial rehab, each carry their own rule).
- Treating Passive House or Net Zero certification as Vermont's baseline energy requirement — it's an optional one-checkmark scoring bonus for Ceiling Credit applications sitting above the actual mandatory floor, which is Efficiency Vermont's 2020 High-Performance Track Standards (or the numeric heating-demand/air-sealing fallback for rehabilitation that can't meet it).
- Assuming Vermont's state prevailing wage law (29 V.S.A. § 161(b)) applies to affordable housing generically — it is triggered by State-owned construction or by Capital Construction Act/Cash Fund appropriation funding at least half of a project over $200,000, not by LIHTC or "affordable housing" status itself.
- Treating VHFA's Underwriting Standards language on Section 3/Davis-Bacon as VHFA imposing its own wage mandate — VHFA requires applicants to certify compliance with whatever a project's actual funding sources independently require; it is not a blanket rule VHFA layers onto every deal on its own authority.
- Assuming federal Davis-Bacon only applies if Vermont's own prevailing wage statute also applies — the two triggers are independent; a deal can owe Davis-Bacon through HOME or National Housing Trust Fund dollars regardless of whether it crosses the state statute's Capital Construction Act funding threshold.
- Citing the June 23, 2026 draft QAP's proposed flat $35,000/unit developer fee cap as current policy — VHFA's own website still designates the 2024-25 QAP (with its percentage-of-TDC schedule) as current, and the draft's cover page itself reads "Effective XXXX" with no confirmed Governor's signature.
- HUD
- LIHTC
- State QAPs
- IRS § 42
- Housing Finance Agencies