Rents, income limits, and the operating pro forma — Massachusetts

All three federal tests are recognized — but income averaging is a 4%-only election with a narrower menu

EOHLC's own compliance language walks through the same three options IRC §42(g) offers everywhere: "The project met either the 20-50 test under Section 42(g)(1)(A), the 40-60 test under Section 42(g)(1)(B), or the average income test under Section 42(g)(1)(C), whichever minimum set-aside test was approved by HLC as being applicable to the project." The QAP defines each in plain terms — 20% of units at 50% AMI, 40% of units at 60% AMI, or a project-wide average of 60% AMI across designated tiers — and states the average income election "may only be utilized if approved by HLC consistent with HLC administrative guidelines." EOHLC has also published a document titled "EOHLC Proposed Income Averaging Guidance," linked from its LIHTC page, which this research did not retrieve in full; sponsors should read that guidance directly rather than relying only on the QAP's summary.

Two real Massachusetts-specific restrictions sit on top of the federal menu. First, the QAP restricts the election itself: "a number of states, including Massachusetts, are allowing the average income election only for 4% credit projects." Second, it narrows the income bands a sponsor can actually use: where federal law permits tiers at 20/30/40/50/60/70/80% of AMI, "HLC typically permits projects to have up to four tiers, with income restrictions at 30%, 50%, 60%, and 80% of AMI" — four bands, not seven, and a specific fixed set of them rather than a sponsor's free pick.

A separate compliance trap is specific to bond-financed 4% deals: the minimum set-aside election governing the LIHTC itself is not automatically the same test that governs the tax-exempt bonds financing the project. "Sponsors should note that projects receiving tax-exempt bond financing must also satisfy either the 20/50 test or the 40/60 test, as Section 142 of the Internal Revenue Code (governing tax-exempt bonds) has not yet been amended to incorporate the average income test." A sponsor electing average income for LIHTC purposes on a bond deal is still running a separate, simpler test underneath it for bond-compliance purposes — both tests have to be tracked, not just one.

A 16% extremely-low-income set-aside sits on top of the minimum set-aside test, not instead of it

Independent of which minimum set-aside a sponsor elects, EOHLC layers on a separate, QAP-specific extremely-low-income requirement as Threshold Criterion #11: "HLC requires sponsors of 2025-2026 tax credit applications to reserve a minimum percentage (16%) of the total number of units in their projects for persons or families earning no more than 30% of area median income. Sponsors should note that the percentage has changed under this QAP." (This research could not confirm what the prior QAP's percentage had been — only that EOHLC states it changed.) A narrower carve-out applies to certain mixed-income deals: "If a sponsor is using tax exempt financing and 4% credits for a mixed-income project with at least 50% of the units at market rates, the sponsor must reserve 15% of the total affordable units" at 30% AMI instead.

EOHLC is candid that this floor is often unworkable without outside subsidy: "Many tax credit sponsors are able to provide more than 16% ELI units in their projects but typically can do so only if they are able to secure sufficient federal or state project-based assistance. Without rental assistance, most ELI tenants simply cannot pay even an affordable rent." The QAP points sponsors toward local-housing-authority rental assistance and Section 811 project-based assistance as the two most likely sources to make additional ELI units feasible.

MassHousing's own bond deals carry a separate, older statutory floor — layered on top

A project financed through MassHousing's Long-Term Tax-Exempt Conduit Loan program — the vehicle that pairs 4% credit with tax-exempt bonds — carries requirements that exist independently of the federal LIHTC tests and the QAP's own ELI threshold. MassHousing's own published fact sheet for that program states: "A disposition agreement, recorded ahead of all mortgages and other restrictions, will require at least 20% of the units at 80% of AMI." That is a state statutory affordability floor tied to MassHousing's enabling authority, not the federal 20/50, 40/60, or average-income test — a sponsor has to satisfy it in addition to, not instead of, whichever LIHTC minimum set-aside test applies.

This fact sheet also caps annual cash-flow distributions to ownership at 10% of equity — a real pro forma waterfall constraint on top of debt service — and requires a 3% set-aside for residents referred by the Massachusetts Department of Mental Health or Department of Developmental Services, which affects both the income mix a sponsor should model and the supportive-services plan submitted with the application.

Where the rent and income numbers actually come from

Unlike states that simply point developers to HUD's raw county-based Multifamily Tax Subsidy Projects (MTSP) tables, Massachusetts organizes its own geography and publishes its own combined table: MassHousing's annually updated "Income and Rent Limits" document — titled, for the current year, "2026 COMMONWEALTH OF MASSACHUSETTS AFFORDABLE HOUSING PROGRAM, INCOME AND RENT LIMITS (For HUD's Assisted Housing Programs and Multifamily Tax Subsidy Projects — ‘MTSP’)" and effective May 1, 2026 — covers "20 MA Income Limit Areas" rather than raw HUD county groupings, and states explicitly that its 30%-of-AMI band is "Applicable to Massachusetts LIHTC Program per EOHLC Qualified Allocation Plan (QAP)." The same document also carries the 50%, 60%, and 80% AMI bands used for the ordinary federal minimum set-aside tests, plus a rent-limit-only 70% AMI band used for older Chapter 40B New England Fund developments. This single MassHousing-published table effectively serves both agencies and both the LIHTC and non-LIHTC affordable programs built on the same AMI bands.

Utility allowances are a thinner, harder-to-verify area of this research. A secondary source (a syndication/compliance-services provider, not EOHLC itself) states that "DHCD's Section 8 regional administrators stopped calculating UAs for all utilities except heat" — in an announcement dated to 2014 — which would mean owners must establish allowances for other utility categories using one of the alternative methods IRC §42(g)(2)(B) and Treas. Reg. §1.42-10 allow (the HUD Utility Schedule Model, a local utility company estimate, an energy-consultant estimate, or an agency estimate) rather than a single EOHLC-published schedule. This research could not independently confirm that 2014 characterization against a current EOHLC document, and could not confirm whether it still describes EOHLC's practice for the 2025-2026 QAP. EOHLC does separately publish current utility allowance schedules for its other rental-subsidy programs (e.g., a "HAC Multi-Family" schedule and an MRVP utility allowance schedule) that LIHTC owners sometimes reference, but this research did not confirm those are an accepted §1.42-10 methodology for LIHTC purposes specifically. Confirm the current utility-allowance methodology directly with EOHLC's compliance staff before underwriting rather than relying on this summary.

The pro forma: no published DCR, no published reserve schedule — "industry standards," underwritten deal by deal

The QAP's Financial Feasibility scoring criterion (20 points, 12-point minimum to advance) sets no numeric floor at all: "Sponsors must submit OneStop+ applications indicating that assumptions regarding debt service coverage, cash flow, and long-term operating projections are consistent with industry standards and acceptable to HLC." That is a discretionary, deal-by-deal standard, not a published ratio — this research found no numeric DCR minimum stated anywhere in the current QAP.

MassHousing's own conduit-loan structure explains why a fixed number is hard to find: in that product, MassHousing is the tax-exempt bond issuer, but "the commercial bank underwrites the loan, using its own standards." The fact sheet lists loan-to-value as "As determined by Commercial Lender, up to 90% LTV" and replacement reserves as "As determined by Commercial Lender" — MassHousing does not itself fix a DCR or reserve number in that program; the underwriting bank does, subject to MassHousing's other program conditions (the 20%-at-80%-AMI statutory floor, the 10%-of-equity dividend limit, and the prevailing-wage condition described above and in Phase 6). This research did not confirm whether MassHousing's direct, non-conduit lending programs publish a fixed DCR figure of their own; treat any specific DCR assumption as needing per-program confirmation rather than a single Massachusetts-wide constant.

EOHLC's cost-reasonableness review is similarly a line-item judgment rather than a formula: it examines "acquisition; construction costs; general development costs; syndication costs; builder's profit, overhead, and general requirements; operating revenues, expenses, and cash flow," and states that "only reserves required by a lender and/or HLC will be allowed" — again, no published minimum reserve deposit or balance. The one place the QAP does require a specific reserve-related analysis is preservation: sponsors must submit "a capital needs assessment and a 20-year replacement reserve analysis that support the scope of proposed improvements to HLC's satisfaction," performed by "a qualified licensed architect, engineer, or qualified capital needs assessment provider." For production (new construction) deals, no equivalent numeric reserve-sizing rule was found in the QAP text.