"MaineHousing's own certification form lists Income Averaging as an option, but the QAP itself says 60% of my units have to serve 50% AMI households no matter what -- so which one actually controls, and what debt-service coverage and reserves does MaineHousing's own underwriting actually require before I can size the loan?"
MaineHousing's own affordability floor sits on top of whatever federal minimum set-aside you elect
Section 42 of the Code lets a project elect one of several minimum set-aside tests, and MaineHousing's own recurring owner certification form (used across MaineHousing's programs) lists all of them as check-box options: the 20-50 test under §42(g)(1)(A), the 40-60 test under §42(g)(1)(B), the 15-40 'deep rent-skewed' test under §42(g)(4)/§142(d)(4)(B), and Income Averaging. But Chapter 16's own Threshold Requirements do not simply defer to whichever box a project checks. Section 5.A states flatly that a Project must 'keep at least 60% of the total Credit Units in a Project occupied by persons with 50% area median income' for the full 45-year affordability term -- a MaineHousing-specific overlay, not a restatement of any one federal test, and one that is more restrictive than the ordinary 40-60 default (60% of units at 50% AMI, not 40% of units at 60% AMI).
This creates a real, practical question this research could not fully resolve from the QAP's text alone: if a project elects federal Income Averaging -- which is designed to let some units serve households up to 80% AMI so long as the project averages to 60% AMI overall -- does MaineHousing's own binding 60%-at-50%-AMI threshold still control regardless of the federal election, effectively capping how much flexibility Income Averaging can actually provide in Maine? The QAP acknowledges Income Averaging exists (it allows MaineHousing to charge 'an additional monitoring fee to cover any increased costs due to income averaging or other extraordinary monitoring requirements,' per Section 4.C) but never explains how it interacts with Section 5.A's own floor. A developer planning around Income Averaging's usual flexibility should confirm directly with MaineHousing's underwriting staff whether Section 5.A's 60%-at-50%-AMI requirement applies on top of an Income Averaging election, rather than assume either way.
MaineHousing's own Rental Loan Program financing notice describes the practical result it expects in the field: 'Required Affordability: 60% of the LIHTC-eligible units at 50% AMI; balance at 60% AMI and/or market,' with a flat 45-year affordability term. Applicants proposing affordability deeper than this minimum -- lower AMI targeting than MaineHousing requires -- must independently demonstrate non-MaineHousing resources to support it and show the deeper targeting does not jeopardize feasibility.
How rents actually get set: the lesser of market rent or maximum Credit rent, with a markup for larger units
Section 7.A.2 of the QAP fixes the mechanics MaineHousing uses to size the Credit itself: MaineHousing uses 'the lesser of (a) the market rent, based on the Application market study as approved by MaineHousing, and (b) the maximum Credit rent. For three or more bedroom units MaineHousing will use the maximum Credit rent for two-bedroom units plus $50.00.' The market study itself must follow the National Council of Housing Market Analysts' Model Standards for Market Studies for Rental Housing (Section 7.E); MaineHousing may require a corrected study, commission its own, or re-characterize unreasonable projections when assessing overall Project Feasibility (Section 5.G).
Maximum Credit rents themselves flow from HUD's published Multifamily Tax Subsidy Project (MTSP) income limits, which MaineHousing republishes annually in its own Rent - Income Charts (the 2026 edition is published as a standalone chart on MaineHousing's site). A separate legacy track applies to older buildings: MaineHousing continues to use HERA Special income and rent limits, rather than current MTSP limits, for LIHTC and tax-exempt-bond projects placed in service before January 1, 2009 -- a distinction that matters for any acquisition/rehabilitation deal involving a pre-2009 building, since applying current MTSP limits to a HERA-held property would misstate allowable rents.
Underwriting the pro forma: MaineHousing's own DCR, vacancy, and cash-flow floors
MaineHousing's underwriting standards for the debt it originates itself -- published in its Rental Loan Program Guide rather than in the QAP -- set specific, numeric floors that a pro forma has to clear before MaineHousing will size a loan. These are MaineHousing's own lending standards, not a restatement of federal LIHTC law, but they function as Maine's de facto minimum underwriting standard for most LIHTC deals because MaineHousing is the primary source of both hard and soft debt on the large majority of Maine LIHTC projects.
| Metric | Standard | Source |
|---|---|---|
| Debt service coverage (first year, stabilized operations) | 1.10 for projects with project-based rental assistance; 1.15 for all other projects -- includes subordinate amortizing debt; MaineHousing may adjust for project/market characteristics | RLP Guide, Sec. 6, p.17; confirmed in MaineHousing All Owners and Managers Notice 2025-09 |
| Vacancy rate | 5%, generally -- adjusted for local market conditions and demographic data | RLP Guide, "Vacancy Rates," p.20 |
| Cash flow floor | At least $500/unit in the first year of stabilized operations; not below $200/unit in any subsequent year on MaineHousing's expense trending | RLP Guide, "Cash Flow," p.17 |
| Pro forma horizon required at Application | 15 years | RLP Guide, "Sustainable Operating Performance," p.20 |
| Loan term / amortization | 30 years full amortization, or 40-year amortization with a balloon at year 30; MaineHousing may offer interest-only structures | RLP Guide, "Loan Terms," p.16 |
These are MaineHousing's own lending criteria for its Rental Loan Program debt, current as of the November 2023 Guide, which the 2026 State Ceiling financing notice expressly incorporates by reference.
Reserves: three different numbers that are easy to confuse with each other
MaineHousing's materials describe reserves at three distinct points in a project's life, each with its own number, and conflating them produces a wrong pro forma. First, at closing, MaineHousing requires an initial Operating Deficit Escrow (ODE), funded from equity and sized to at least 3 months of debt service, replacement reserve funding, and operating expenses for an acquisition/rehabilitation project with stable occupancy, or at least 6 months for new construction or conversion of non-residential property. Second, the Replacement Reserve itself is funded at two different rates depending on project type: initial funding of $2,000/unit (senior housing) or $3,000/unit (other units) for existing Section 8 project-based or MaineHousing-refinanced housing, versus 1% of the cost of structures for new construction; ongoing annual funding is calculated at $500/unit/year initially, escalating 3% per year. Third, and separately, MaineHousing's Asset Management division applies a HUD-benchmarked minimum account balance the Replacement Reserve must maintain at all times once the project is operating: $1,500/unit for family projects, $1,000/unit or bed for elderly and supportive housing projects -- a standing-balance floor, not an annual deposit rate.
A separate, smaller Working Capital reserve may be included in the development budget for new construction or acquisition/rehabilitation of vacant properties, capped at the lesser of $1,000/unit or $50,000, to cover operating shortfalls during lease-up. A Tax & Insurance escrow is also required, funded at construction-loan closing for existing Section 8/refinanced properties or at construction completion for everything else.
Utility allowances: MaineHousing's own LIHTC Allocating Agency schedule, locked in for the Extended Use Agreement term
For units with a HOME and/or LIHTC designation placed in service after August 23, 2013, MaineHousing's own guidance requires use of the State Allocating Agency's utility allowance charts, with one carve-out: a unit that carries a project-based or tenant-based voucher may instead use the local public housing authority's utility allowance for that unit only. For units placed in service before that date, an owner may choose either the local housing authority's or the Allocating Agency's chart. Properties may also elect, with MaineHousing's prior approval, one of three alternative methodologies recognized under the LIHTC utility-allowance regulations: a Utility Company Estimate, the HUD Utility Schedule Model, or an Energy Consumption Model.
Whichever methodology an owner selects at the start of the compliance period continues to apply for the duration of the Extended Use Agreement; changing methods requires MaineHousing's approval. Chapter 16's monitoring section separately requires 'monitoring and reporting of all utilities for all units, in the manner and form provided by MaineHousing,' for every project it funds -- a recurring compliance obligation, not a one-time election. The utility allowance guidance describing this framework in this research is dated January 13, 2021; this research found no more recent published revision, so a developer should confirm with MaineHousing that the methodology options and voucher carve-out described here remain current before relying on them.
Where this goes wrong
- Assuming a federal Income Averaging election gives a Maine project the usual flexibility to serve units up to 80% AMI -- Chapter 16's own Section 5.A threshold independently requires at least 60% of Credit Units to serve 50% AMI households regardless of the federal minimum-set-aside election, and this research could not confirm from the QAP's text how (or whether) Income Averaging actually overrides that floor.
- Reading MaineHousing's 60%-at-50%-AMI threshold as just a restatement of the federal 40-60 test -- it is a stricter, MaineHousing-specific overlay (60% of units at 50% AMI, not 40% of units at 60% AMI) that applies independently of which federal test a project elects.
- Sizing 3+ bedroom unit rents at the actual maximum Credit rent for that bedroom count -- MaineHousing instead uses the 2-bedroom maximum Credit rent plus a flat $50, which can be lower than a literal 3+BR maximum.
- Applying current HUD MTSP income and rent limits to a building placed in service before January 1, 2009 -- MaineHousing continues to apply HERA Special limits to those older projects instead.
- Treating MaineHousing's 1.10/1.15 debt-service-coverage minimums as federal LIHTC law -- they are MaineHousing's own Rental Loan Program lending standards, which apply to MaineHousing-originated debt, not a Section 42 requirement, though they function as the practical underwriting floor for most Maine LIHTC deals given MaineHousing's role as primary lender.
- Confusing the Operating Deficit Escrow's initial funding requirement (3 or 6 months of expenses, funded from equity at closing) with the Replacement Reserve's ongoing annual funding rate ($500/unit/year, escalating 3%/year) -- they are different reserves with different purposes, timing, and funding sources.
- Confusing the Replacement Reserve's initial underwriting-phase funding calculation ($2,000-$3,000/unit or 1% of structure cost) with Asset Management's separate, ongoing minimum account-balance requirement ($1,500/unit family, $1,000/unit elderly/supportive) that applies once the project is operating -- the two numbers serve different purposes and come from different MaineHousing documents.
- Assuming MaineHousing's 5% underwriting vacancy rate is a hard rule rather than a general practice MaineHousing may adjust for local market conditions and demographic data.
- Locking in a utility allowance methodology without accounting for the Extended Use Agreement-length commitment -- MaineHousing requires the elected methodology to continue for the compliance/extended-use term absent its approval of a change.
- Assuming every unit in a HOME/LIHTC project must use the State Allocating Agency's utility allowance chart -- a unit carrying a project-based or tenant-based voucher may instead use the local PHA's allowance for that unit only.
- Relying on the January 2021-dated utility allowance guidance found in this research as necessarily still current without confirming with MaineHousing directly -- no more recent published revision was located.
- HUD
- LIHTC
- State QAPs
- IRS § 42
- Housing Finance Agencies