Restricted rents and the operating pro forma — Alabama

What happens, and in what order

The structural risk is the same one every state's version of this phase has: nothing in the sequence has a natural human checkpoint. But Alabama adds two wrinkles of its own — a utility allowance method that cannot be swapped once chosen until the 8609s are issued, and an operating-expense number AHFA treats as a ceiling on what it will underwrite rather than a floor the pro forma has to clear.

Which table applies: HUD's limits, and Alabama's rural election

HUD released the 2026 MTSP income limits on May 1, 2026 — confirmed independently here, not borrowed from another state's guide: AHFA's own Multifamily Compliance Department memo transmitting Alabama's non-metropolitan income and rent limits is itself dated May 1, 2026, the same day.

AHFA's Compliance Manual states the standard federal 45-day rule for implementing new income limits — the effective date or 45 days after publication, whichever is later — correctly citing it as Revenue Ruling 94-57 (Rev. Rul. 94-57, 1994-2 C.B. 5). That is a distinct authority from Revenue Procedure 94-57, which governs the separate gross-rent-floor election (credit allocation date vs. placed-in-service date) and which the same Compliance Manual cites separately, by its own correct name, elsewhere in the manual. Neither the 2026 nor the 2027 Housing Credit QAP states an agency default position on the gross-rent-floor election itself the way CTCAC's annual memo does for California — fall back to the bare federal rule and the deal's own documented election.

The genuinely Alabama-specific piece: under IRC § 42(i)(8) (added by the Housing and Economic Recovery Act of 2008, effective for buildings placed in service after July 30, 2008), a building in a rural area may use the greater of the area's own income limit or the national non-metropolitan median. AHFA implements this every year with its own memo and its own table — not a cross-reference to someone else's number.

The formula, and where AHFA sends you to run it

A unit is rent-restricted if gross rent does not exceed 30 percent of the imputed income limitation applicable to the unit (IRC § 42(g)(2)(A)), using the federal imputed-household-size convention: 1 person for a unit with no separate bedroom, 1.5 persons per bedroom thereafter (a 2BR imputes to 3, a 3BR to 4.5, a 4BR to 6), with half-person sizes averaged between the two adjacent published limits (IRC § 42(g)(2)(C)). max_gross_rent_monthly = FLOOR(imputed_income_limit × 0.30 / 12) — the same truncation rule, and the same off-by-one risk from rounding instead of flooring, as in every other state.

AHFA does not publish its own maximum-rent tool. Its Compliance Manual points owners to HUD's published limits directly and to a link for the Novogradac Rent & Income Limit Calculator — a real, specific, and slightly unusual choice: unlike CTCAC or TDHCA, AHFA leans on a third-party calculator rather than maintaining its own rent-and-income lookup tool for the standard (non-rural) tables.

Utility allowances — AHFA's hierarchy, and the method you can't switch

The federal backbone is 26 CFR § 1.42-10, identical to every other state: a deduction for any utility other than telephone, cable or internet paid directly by the household, updated at least annually.

Two things worth flagging exactly because AHFA states them so plainly. First: "There is no provision for a utility allowance floor as there is for rent" — the manual's own words; unlike the rent side, nothing stops a utility allowance from being redetermined lower. Second, and genuinely distinct from what other states' compliance manuals say: "The method of obtaining the utility allowance initially chosen by the Ownership Entity cannot be changed until after the IRS Form 8609(s) has been issued by AHFA." An owner may update the method on paper before then, but AHFA will not approve the switch until the 8609s are in hand.

The 90-day implementation rule is standard federal law, restated in the manual: a UA increase or decrease must be reflected in rent within 90 days of its effective date.

Which revenue counts — and a real gap in AHFA's published guidance

Section 42(g)(2)(B)(i) excludes Section 8 and comparable rental assistance payments from the gross-rent test nationally, unchanged in Alabama: a project-based unit can collect contract rent above the LIHTC limit because only the tenant's own portion is tested.

What is missing, and worth saying plainly rather than guessing at: the AHFA documents reviewed for this brief — the 2026 and 2027 QAPs and the Compliance Manual — address tenant-based and project-based assistance for occupancy and income-certification purposes, but none of them states, the way CTCAC § 10327(f) and TDHCA's own rule text do, whether AHFA's underwriting treats tenant-based voucher income as countable cash flow for the DSCR test. Confirm directly with AHFA's underwriting desk before assuming either way — this is exactly the kind of assumption a lender's or investor's independent re-underwriting will catch if guessed wrong.

A concrete second rent ceiling shows up on any deal layering HOME funds with Housing Credits. Under 24 CFR § 92.252, AHFA's own published HOME rent limits cap the "High" and "Low" HOME rents at the lesser of a HUD fair-market-rent-based figure or the income-based rent — and in lower-median-income counties that ceiling binds below what the LIHTC-style 60% calculation alone would produce.

The pro forma is a parameter set AHFA republishes every cycle, not a model baked into the QAP

The QAP says this about itself: "Additional underwriting criteria and assumptions that are market-driven, such as interest rates, Housing Credit pricing, and project operating expenses will be available at www.ahfa.com prior to the application cycle" (AHFA 2027 QAP § II.E.1.iii). Only the DSCR floor and the two reserve formulas are written into the QAP text itself; everything else — vacancy, the expense ceiling, the debt rate, the term, the credit price AHFA underwrites to — lives in a separate document AHFA republishes each competitive cycle.

Developer fee is capped at 15% of total project costs excluding the fee itself (§ II.F.1) — the same figure AHFA's own training deck has held constant every year from 2020 through 2025. No explicit multi-year positive-cash-flow-through-year-15 mandate and no maximum cash-flow ceiling test (the kind that penalizes over-performing a pro forma) turned up anywhere in the current QAP text reviewed for this brief — that is an absence in the documents found, not a confirmed statement that no such constraint exists anywhere in AHFA's practice, and it is worth confirming directly with AHFA's underwriting desk before assuming a favorable pro forma carries no risk of being trimmed.

Two Alabama-specific things that reach into this phase

First, the Alabama Workforce Housing Tax Credit. Act No. 2024-302, approved May 9, 2024, created a state tax credit AHFA administers as a companion to — not a substitute for — the federal Housing Credit. A project must have submitted or be concurrently submitting a successful federal Housing Credit application, and it "covenants to comply with tenant income restrictions applicable to Housing Credits." It does not create a separate, higher-AMI rent tier the way "workforce housing" sometimes implies in other contexts; the rent and income math for this phase is identical to a standard Housing Credit deal.

Second, the Qualified Contract exit — genuinely different from both California (unavailable outright) and the plain federal default (available after year 14). AHFA's QAP requires every project to commit in writing not to apply for a Qualified Contract "until after the end of the 19th year of the Extended Use Period, which is 4 years after the end of the 15-Year Compliance Period" (§ II.C.14) — a 4-to-5-year extension past the federal floor. On top of that, AHFA's own scoring system offers 3 points for irrevocably waiving the Qualified Contract request altogether and remaining a Qualified Affordable Housing Project for the full 30-year Extended Use Period. A deal that took those 3 points has no year-15-or-later market-value exit to model at all — not a delayed one, a removed one.