"CHFA's own Threshold floor is 20% of units at 50% AMI, but the LIHTC Guideline separately walks through an Average Income election with its own unit-parity and Next Available Unit mechanics — and CHFA underwrites every deal to a flat 1.15x debt-coverage standard while a different CHFA-published guideline sets a 1.10x-to-1.25x band for bond-financed deals reviewed through the State Bond Commission. How do the minimum set-aside choice, the rent math, and CHFA's actual underwriting assumptions fit together?"
Which minimum set-aside, and what CHFA's own Threshold actually requires
Basic Threshold Requirement #8 requires "a commitment of at least forty (40) years of affordability by virtue of the LIHTC Program Extended Low-Income Housing Commitment (the ELIHC)" and states that "[t]he Proposed Development shall include a minimum of 20% of the units in the Proposed Development that shall serve households with incomes less than or equal to 50% of the Area Median Income (AMI)" — the federal 20-50 test, stated here as CHFA's own Threshold floor rather than as one menu option among three. CHFA's LIHTC Program Guideline and Glossary of Terms confirm all three federal minimum set-aside (MSA) options remain available under the QAP: 20% of units at or below 50% AMI; 40% of units at or below 60% AMI; or the Average Income Set-Aside, under which units may be designated up to 80% AMI so long as the average income designation across all qualified units does not exceed 60% AMI and at least 40% of total units are designated as qualified units.
The Guideline devotes an entire section to the compliance mechanics of electing Average Income, conditioning its use on three things: "ability to demonstrate unit parity regarding bedroom size by Area Median Income (AMI) band, i.e., larger units cannot all be targeted to households in higher AMI bands"; that "AMI bands must be supported by a market study"; and that "all LIHTC rents should be at least 10% below market rents" (LIHTC Guideline, Section III.A). On compliance, "[t]he owner must certify to CHFA that the Average Income MSA was satisfied on 12/31 of the second year the project was placed-in-service," unit parity by bedroom size must be maintained "throughout the compliance and extended use period," and if two or more qualified units go over-income at the same time, "the owner must make a reasonable effort to designate the next available market rate unit at the lower AMI of the two units" under the Next Available Unit Rule (Section III.B).
Which table applies, and a genuinely CT-specific rent-calculation footnote
CHFA passes through HUD's income limits directly rather than publishing an independently derived methodology: its own annual income limit publication states plainly, "all income limits used for the LIHTC program must be from the Multifamily Tax Subsidy Project (MTSP) Income Limits published by HUD. Section 8 properties will continue to use the Section 8 Income Limits." CHFA republishes the current MTSP figures annually (the 2025 edition, effective April 1, 2025, carried a "[m]ust be put in use by 5/15/2025" compliance date) and passes through HUD's HERA hold-harmless treatment without a Connecticut-specific override.
One footnote in CHFA's own income-and-rent-limit publication is a real, Connecticut-specific carryover from an earlier era: "Maximum rents for LIHTC developments are determined by bedroom size for all developments after 1989 and pre-1990 developments receiving the irrevocable Rent Change Election of 1994. For developments before 1990, number of unit occupants must be used." A small population of older Connecticut LIHTC developments that did not make that 1994 election therefore still compute maximum rent from the federal default occupancy-based formula — persons-per-unit rather than bedroom count — rather than the bedroom-size method every post-1989 development and every 1994-electing older development uses.
Utility allowances — CHFA leaves the method open, and EZFeasi does not yet automate any of them
CHFA's LIHTC Glossary defines a Utility Allowance as "[a]n amount of money intended to offset the utility expenses of a resident of a particular unit established and published in a utility allowance schedule either by HUD, DOH or a Public Housing Authority, or a study from the utility company that stipulates the rates based on typical usage" — four acceptable sourcing methods rather than one prescribed statewide schedule. The applicable gross rent "include[s] all utilities except for telephone, cable television, and internet charges," and "the applicable utility allowance amount must be subtracted to arrive at the maximum net affordable rent" (LIHTC Program Guideline, Section VII.B.1).
Because CHFA does not itself publish a single statewide utility allowance schedule the way some states' housing finance agencies do, which of the four methods governs a given unit turns on what the owner actually elects and documents for that development — a real compliance-file item rather than a lookup CHFA maintains centrally. EZFeasi does not currently automate any of the four methods for Connecticut.
Which revenue counts, and CHFA's own conservative treatment of commercial income
CHFA's Multifamily Underwriting Standards Summary sets vacancy-rate underwriting assumptions on a sliding band by income tier: 2.5%-5.0% for units at or below 30% AMI, 5.0%-10.0% for units above 30% up to 60% AMI, 7.0%-10.0% for units above 60% up to 80% AMI, and 10.0%-15.0% for units above 80% AMI or at market rate. Commercial income gets materially more conservative treatment: the same Summary sets a minimum 50% vacancy/discount assumption on commercial income and states plainly that "CHFA reserves the right not to rely on the commercial income to size its mortgage loan" at all.
The pro forma parameters CHFA actually prescribes, and two different DSC standards depending on the issuer
| Parameter | CHFA standard |
|---|---|
| Debt Service Coverage Ratio | 1.15x standard for all amortizing and payable debt, adjustable for market/policy conditions |
| Operating reserve | Cash deposit of up to 6 months scheduled debt service + 6 months operating expenses (incl. replacement reserves and RE taxes); additional funds may be required to sustain 1.15x DSC for a minimum of 15 years |
| Replacement reserves | $325/unit/yr (elderly, new construction) to $425/unit/yr (family/supportive housing, rehabilitation) |
| Per-unit operating expense range (stabilized year, excl. reserves/RE taxes) | $5,500-$8,500 (101+ units) to $10,000-$13,000 (supportive housing) — escalated 3% annually for future years |
| Trending assumptions | Income: 2%; Expenses and taxes: 3% |
| Loan-to-value | Up to 90% for CHFA's permanent loan (may exceed 90% during construction) |
CHFA Multifamily Rental Housing Program Guideline (effective April 1, 2024), Multifamily Underwriting Standards Summary.
That 1.15x figure is not a hard pass/fail cliff: CHFA's LIHTC Program Guideline states directly that "CHFA will require proposals with high debt service coverages to increase loan amortizing amounts, increase deferred developer fee, or both" (Section VII.A.3) — an over-covered deal gets resized rather than simply approved as submitted. A separate, older Connecticut State Bond Commission underwriting guideline — applicable when an entity other than CHFA issues the tax-exempt bonds and the Office of Policy and Management (OPM) requests CHFA's review — sets a materially different band: "[t]he minimum DSC should be 1.10 for developments fully insured by the federal government or 1.15 for uninsured developments. DSC should not exceed 1.25 during the first fifteen (15) years of the permanent mortgage loan term," a standard the same document states exists specifically because "DSCs above this amount produce an unnecessary and inefficient use of TEBs and LIHTCs." That document also states explicitly that "when CHFA is the issuing agency, CHFA's Procedure, policies and guidelines shall prevail" instead — meaning the applicable DSC standard genuinely depends on who is issuing the bonds, not just on the presence of tax-exempt bond financing generally.
Where this goes wrong
- Assuming CT publishes its own income-limit methodology departure from HUD's MTSP figures — CHFA's own income-limit publication states directly that all LIHTC income limits must come from HUD's published MTSP figures, with no Connecticut-specific override.
- Treating the 20%-at-50%-AMI floor in Basic Threshold Requirement #8 as CHFA's only minimum set-aside pathway — the LIHTC Program Guideline devotes a full section to the Average Income Set-Aside, with its own bedroom-size unit-parity rule, market-study support requirement, 10%-below-market-rent standard, and Next Available Unit Rule.
- Missing the pre-1990 / Rent Change Election of 1994 wrinkle — a small population of older Connecticut LIHTC developments compute maximum rent from unit occupancy count rather than bedroom size, unlike every post-1989 development and every older development that made the 1994 election.
- Assuming a single, statewide utility-allowance method applies uniformly across Connecticut — CHFA's own Glossary lists four acceptable sources (HUD schedule, DOH schedule, PHA schedule, or a utility-company usage study); which one governs depends on what the owner elects and documents, and EZFeasi does not yet automate any of the four.
- Underwriting commercial income the same way as residential income — CHFA's own Underwriting Standards Summary imposes a minimum 50% vacancy/discount assumption on commercial income and reserves the right not to rely on it at all to size the mortgage loan.
- Treating 1.15x DCR as a hard pass/fail threshold rather than a target CHFA will resize a deal around — CHFA's own LIHTC Guideline states it will require high-coverage proposals to increase amortizing debt or deferred developer fee, or both, rather than simply approving an over-covered deal as submitted.
- Applying CHFA's flat 1.15x DSC standard to every bond-financed deal without checking who the issuer is — the Connecticut State Bond Commission's own underwriting guideline sets a different 1.10x/1.15x floor and 1.25x ceiling specifically for deals where a non-CHFA entity issues the bonds and OPM requests CHFA's review; CHFA's own standards govern instead whenever CHFA itself is the issuing agency.
- Treating the per-unit operating-expense ranges as advisory only — CHFA states applicants are "expected to" stay within the published ranges and must submit "complete written justification" for any deviation, functioning as a real documentation gate rather than a suggestion.
- Assuming the flat 6-months-debt-service-plus-6-months-operating-expense reserve baseline is always sufficient — CHFA states additional reserve funds may specifically be required to sustain a 1.15x DSC for a full 15 years where the baseline deposit wouldn't otherwise support it.
- HUD
- LIHTC
- State QAPs
- IRS § 42
- Housing Finance Agencies