DHCR's 9% round vs. HFA's 4% bond process — New York

Two agencies, and more than one rulebook for the 4% side

DHCR's competitive 9% process is set out in full at 9 NYCRR Part 2040. Bond-financed 4% credits are, per §2040.4(a), "processed by the New York State Housing Finance Agency under its procedures" — which in practice means HFA's own regulation, Part 2188 (a separate Title 9 part, issued under authority granted by Part 2040). Part 2188 itself says that projects drawing on the competitive State Credit Ceiling — as opposed to as-of-right, volume-cap 4% credits — fall back under Part 2040's allocation process instead. So which rulebook actually governs a given 4% deal depends on how it's structured, not just on the '4%' label.

Part 2040 also keeps its own bond-application provision at §2040.4(b)–(d), for applications filed directly with DHCR. Under it, DHCR reviews the application against the same threshold-eligibility criteria (§2040.3(e)) and scoring criteria (§2040.3(f)) the 9% round uses — but only "for eligibility and public purpose," within 60 days of a complete filing. Critically, the credit amount is not set by DHCR's competitive ranking rule (§2040.3(g)(1)(ii), which operates "among the projects selected for a credit allocation" in a competitive round) — it's set under §2040.4(d), where "the issuer of the tax exempt bonds is responsible for determining the dollar amount of credit which is necessary for the financial feasibility of the project." A 4% deal borrows DHCR's threshold and scoring language for public-purpose review, but skips its competitive dollar-ranking entirely.

9% also charges a separate $1,000 fee if a binding agreement is requested, and lets Non-profit, MBE, WBE, or Certified SDVOB applicants (as sole general partner or managing member) defer processing fees to carryover. The DHCR-filed bond path's deferral is narrower on paper: §2040.4(c) allows only not-for-profit applicants to defer, and only the application fee itself — not a broader "processing fees" deferral. Don't assume the 9% side's MBE/WBE/SDVOB deferral carries over to a bond filing; the text doesn't say it does.

The other side of the trade-off is credit size. 9% still delivers roughly nine times the annual credit rate of the federal 4% floor established by the Consolidated Appropriations Act, 2021 (IRC §42(b)(3)) — meaning a 4% deal raises far less tax-credit equity per dollar of qualified basis, and structurally depends on subordinate subsidy (HFA, and in NYC, HPD/HDC second mortgages) to close the resulting gap.

New York City: HPD/HDC layer on top of, not instead of, HFA

HDC's ELLA program (targeting units affordable primarily below 60% AMI) and its New Construction program (targeting primarily below 80% AMI) are both bond-financed 4% structures, each pairing tax-exempt bond proceeds with a subordinate HDC second mortgage of up to $65,000/unit — capped at $15 million per project under ELLA, $20 million under New Construction. Both underwrite to the same 1.15 minimum DSCR and 1.05 minimum income-to-expense ratio HFA uses statewide — confirmed independently in HFA's own Winter 2026 term sheet and in HPD's July 2025 New Construction Finance term sheet. A NYC bond deal isn't a separate underwriting universe; it's the same floor with HPD added as a second, parallel funder.

HPD's own per-unit subsidy ceiling (its July 2025 New Construction Finance term sheet, Table 2) runs roughly $160,000–$420,000 per unit depending on the project's LIHTC percentage/Target Average AMI tier and whether it's 4% or 9% financed — set as a maximum, not a guarantee; HPD explicitly expects sponsors to seek competitive pricing and additional sources first.

NYC deals also carry a property-tax-benefit menu that doesn't exist upstate: §421-a, §485-x, §420-c, and Article XI exemptions, layered on top of the LIHTC structure. §420-c specifically requires at least 70% of units to be funded with LIHTC to qualify — a real, checkable threshold, not a formality. Outside the city, the equivalent relief usually comes from a local IDA PILOT agreement instead, a different mechanism entirely.

What the election actually turns on

9% buys more credit per unit of basis but comes with DHCR's full competitive scoring exposure, a single annual RFP round, and — per phase 6 — a real Cost Effectiveness ceiling on how expensive the construction package can be. A DHCR-filed or HFA-processed 4% deal is as-of-right once bond volume cap is secured, skips DHCR's competitive credit-dollar ranking, and moves on a rolling basis rather than an annual calendar — a real advantage for a site with a fixed construction-start deadline that doesn't line up with the 9% round.

Combining a 9% competitive phase with a 4% bond-financed phase on the same site ("twinning") is a nationally standard structuring technique, and HFA's own program materials note that DHCR can designate 9% ceiling credit to projects not subject to tax-exempt bond financing. That said, the precise New York-specific mechanics of twinning two phases together were not independently confirmed against primary regulatory text in this research — treat it as a generic structuring option to verify against current HCR RFP guidance and counsel before relying on it, not as a codified NY program with defined rules.