"Montana doesn't publish its own income and rent limit tables — so where do the numbers in my pro forma actually come from, and what debt-coverage and reserve floors does MBOH expect me to hit?"
Minimum set-aside: Montana borrows the federal definitions rather than restating them
The 2027 QAP does not define 20-50, 40-60, or Average Income anywhere in its own text. Its Appendix A definitions section opens by saying "Terms used in this QAP shall have the same meaning as in Section 42 and implementing regulations unless otherwise indicated" — for the minimum set-aside itself, the QAP relies entirely on that incorporation-by-reference rather than restating the federal test the way some states' QAPs do. The election is still made the same way everywhere: on IRS Form 8609, and Montana's own compliance certification requires the Owner to certify annually "the Project met the requirements of the 20-50 test under Section 42(g)(1)(A), the 40-60 test under Section 42(g)(1)(B), whichever is applicable to the Project (see Section 42(g)(1)(C) if Average Income is selected as the minimum set-aside on IRS Form 8609)" (2027 QAP Appendix C, Section I.1(i)).
What Montana adds on top of the federal floor is a considerably deeper targeting requirement, already summarized in this guide's Phase 4 entry: a weighted-average income target of 53% AMI or below for 9% Projects electing any of the three minimum set-asides, or 60% AMI or below for 4% Projects (2027 QAP Section VII.A.1, "Income and Rent Level Targeting"). The QAP states this second layer explicitly under the 4% paragraph: "Average Income will not be allowed unless 100% of the units are restricted." The QAP's text does not repeat that same 100%-restricted condition under the 9% paragraph — whether it also binds a 9% Project electing Average Income was not something this research could confirm one way or the other from the QAP's own wording, though 9% Montana Projects are, in practice, awarded as 100%-affordable deals far more often than 4% bond deals are.
| Unit AMI designation | Household allowed to income-qualify up to |
|---|---|
| 20% units | 29% AMI |
| 30% units | 39% AMI |
| 40% units | 49% AMI |
| 50% units | 55% AMI (40-60 election must apply) |
Quoted directly from the QAP's own text. The QAP does not further explain the mechanism behind this band (e.g., whether it is a move-in qualifying cushion or an averaging convention) beyond stating it; MBOH calculates the Average Income targeting percentage "based on the area median income rent maximum allowed." Confirm the practical effect of this provision directly with MBOH before relying on it to size a specific unit's tenant eligibility.
One easy-to-miss administrative rule: "If the project has a manager's unit, it will be considered a 60% unit and calculated as such" for purposes of the weighted-average targeting math (2027 QAP Section VII.A.1) — a manager's unit is not simply excluded from the calculation the way it is excluded from the building's Common Area definition.
Where the income and rent numbers actually come from: Novogradac, not an MBOH table
Montana Housing maintains no separate, MBOH-published LIHTC income or rent limit schedule the way some states do. Instead, the Full-Application's own Threshold Requirements list requires the Applicant to "Provide Novogradac Rent and Income Calculator results for the project (Novogradac calculator available on MBOH's website)" (2027 QAP Section VI.A.2, item 9) — MBOH points developers to the same third-party tool rather than maintaining its own published table, hosting a link to it as a courtesy rather than publishing the underlying HUD figures itself.
This research did not locate a QAP provision addressing a Gross Rent Floor or HERA Hold Harmless mechanic by name — if either concept is treated differently under Montana's program than under the general federal rule, that treatment was not found in the 2027 QAP's text and should be confirmed directly with MBOH or a compliance professional before assuming standard federal defaults control.
Utility allowances: four approved sources, and Montana won't take a utility company's own estimate
| Source | Note |
|---|---|
| Montana Department of Commerce Section 8 Utility Allowances | |
| USDA Rural Development | |
| HUD Utility Schedule Model (HUSM) | Project may self-calculate from Pre-Application through Placed in Service, but must obtain MBOH approval by Placed in Service |
| Energy Consumption Model (ECM) | Same self-calculate-then-approve timeline as HUSM; refer to the ECM Form on MBOH's website for the current checklist |
The QAP is explicit that a fifth path doesn't exist: "Utility allowances provided by utility providers will not be considered or accepted." This is a notably shorter list than some states' compliance manuals (which also recognize a local PHA schedule, an HFA estimate, or an Engineer Model as alternatives) — Montana's QAP names only these four.
The approval mechanics carry their own clock: requests for HUSM or ECM allowance approval, and any annual re-approval request, "must be submitted to MBOH at least 90 days before the projected start date or anniversary approval date," and "numbers used for approval request submission must not be more than 30 days old at time of submission" (2027 QAP Section VIII.A.6). A developer building a HUSM or ECM model on stale utility-rate data risks having MBOH bounce the approval request back for re-work inside that 90-day window.
The pro forma MBOH actually underwrites to
Montana's Debt Coverage Ratio (DCR) standard is a two-tier test keyed to the pro forma's own trendline, not a single flat range: "between 1.15 and 1.35 in the first year of normal operation if projected to trend upward" or "between 1.10 and 1.50 during the entire first 15 years of normal operation if projected to trend downward" (2027 QAP Section VIII.A.2). Applications outside either range need a narrative justification, and if MBOH's own underwriting shows a DCR above the applicable range without acceptable justification, "MBOH will reduce the amount of Credits requested or the rent levels proposed" — the ratio isn't just a floor a developer needs to clear, MBOH will actively cut the request if it runs too rich.
A second, less commonly seen metric sits alongside DCR: the Total Expense Coverage Ratio, evaluated case-by-case against a 1.10 benchmark (2027 QAP Section VIII.A.3) — "MBOH will consider, on a case-by-case basis, projects which materially deviate from a 1.10 Expense Coverage Ratio." No further mechanical definition or bright-line cutoff is given for this second ratio in the QAP's text.
| Assumption | MBOH standard |
|---|---|
| Vacancy rate — 20 units or fewer | 10% |
| Vacancy rate — more than 20 up to 50 units | 7% |
| Vacancy rate — more than 50 units, or 100% project-based rental assistance | 5% |
| Rent trending | 2% annually |
| Expense trending | 3% annually |
| Reserves trending | As proposed in the Application, not to exceed 3% annually |
| Operating expenses per unit | $3,000–$8,000 annually (reasonableness range) |
Montana's vacancy tiers are keyed purely to unit count (or 100% project-based assistance) rather than to a family-vs.-senior split the way some states' underwriting standards run — a small senior project of 30 units and a small family project of 30 units are underwritten to the same 7% vacancy factor here.
Reserves: lighter than many states, but they follow the property, not the owner
Both reserve requirements carry an identical retention rule that follows the property through any change of ownership: "Project replacement and operating reserves and reserve accounts required by applicable law, the QAP or the LURA must be retained by the Project (and transferred to the new owner as applicable) in or as part of any sale, transfer or exchange of the Project. The Owner shall not withdraw or retain any such reserves ... and the Board may void any sale, transfer or exchange of the Project that violates this requirement" (2027 QAP Section VIII.A.4-5). The same pro-rata reserve-transfer mechanic reappears in the Eventual Homeownership provisions for any unit later converted to homeownership (2027 QAP Section VIII.C).
Rent-setting after occupancy: voucher floors and a 10%-or-AMI rent-increase cap
Once a property is operating, Appendix C.B governs actual rent-setting, and it layers a specific voucher-holder rule on top of the ordinary Section 42 rent restriction. A Project "must adjust the rent amount for a Voucher Holder and may not charge the Voucher Holder rent exceeding the Payment Standard applicable to the Voucher Holder if the Project rent amount is within the greater of 5% or $50 of the current voucher Payment Standard applicable to the Voucher Holder" — covering Housing Choice Vouchers, VASH, Mainstream, Emergency Housing Vouchers, and similar programs. MBOH staff may grant an exception on a showing of substantial financial hardship to the property (2027 QAP Appendix C, Section B).
For existing tenants generally, "rent increases in any calendar year shall not exceed the lesser of any rent increases permitted as a result of any increase in the Area Median Income ('AMI') or ten percent (10%) of the then-current rent amount," capped at one increase per year with 60 days' tenant notice. MBOH staff may grant exceptions "as necessary to reflect actual cost increases," but the request — with supporting cost and rent documentation — must be submitted at least 90 days before the desired effective date. Any new mandatory tenant obligation, such as shifting a previously owner-paid utility onto the tenant, also requires separate MBOH approval regardless of whether the resulting rent stays within the 10%/AMI cap (2027 QAP Appendix C, Section B).
Market study benchmarks that feed the pro forma's revenue line
The Full-Application's Full Market Study threshold item sets three numeric targets a market analyst's report must document, feeding directly into the pro forma's absorption and rent assumptions: a projected "Vacancy Rate ... at or below 7%," an "Absorption Rate ... less than 5 months," and "Proposed Project Rents ... at least 10% below adjusted market rents" (2027 QAP Section VI.A.2, item 13). The study itself must be completed within six months of the Application deadline, with a physical market-area inspection within the prior year.
Where this goes wrong
- Looking for a Montana-specific minimum set-aside definition in the QAP text. There isn't one — Appendix A incorporates Section 42's definitions by reference, and the QAP only overlays its own deeper 53%/60% weighted-average targeting requirement on top.
- Assuming MBOH publishes its own LIHTC income and rent limit table. It doesn't — the Full-Application threshold list requires the Applicant's own Novogradac Rent and Income Calculator output instead (2027 QAP Section VI.A.2, item 9).
- Modeling a single flat DCR range. Montana's standard splits by trendline: 1.15–1.35 in year one if trending upward, or 1.10–1.50 across the full first 15 years if trending downward (2027 QAP Section VIII.A.2) — using the wrong band understates or overstates feasible debt.
- Overlooking the separate 1.10 Total Expense Coverage Ratio benchmark alongside DCR. MBOH reviews deviations from it case-by-case (2027 QAP Section VIII.A.3), and it is a distinct test from debt coverage.
- Submitting a utility company's own rate estimate as the utility allowance source. The QAP states plainly that "utility allowances provided by utility providers will not be considered or accepted" (2027 QAP Section VIII.A.6) — only Section 8 UA, USDA RD, HUSM, or ECM qualify.
- Building a HUSM or ECM utility allowance model on rate data older than 30 days, or submitting the approval request inside the 90-day window before the start date or anniversary. Both are explicit QAP requirements (Section VIII.A.6).
- Applying a single vacancy rate across a whole portfolio regardless of unit count. Montana's vacancy tiers (10%/7%/5%) key off unit count and project-based assistance status, not property type (2027 QAP Section VIII.A.7).
- Assuming reserves stay with the seller in a property transfer. Both the Operating Reserve and Replacement Reserve are required to be "retained by the Project ... and transferred to the new owner," and MBOH may void a sale that violates this (2027 QAP Section VIII.A.4-5).
- Charging a Housing Choice Voucher or VASH tenant the full LIHTC-restricted rent when that rent sits within 5%/$50 of the voucher Payment Standard. The QAP requires the rent to be adjusted down to the Payment Standard in that band, absent an MBOH-approved hardship exception (2027 QAP Appendix C, Section B).
- Raising rents on an existing tenant by more than the lesser of the AMI-driven increase or 10% without an MBOH exception request filed at least 90 days in advance, or raising rents on the same unit twice within a calendar year.
- Adding a new mandatory tenant-paid utility or fee without separate MBOH approval, even if the resulting rent still falls within the 10%/AMI cap.
- Treating the QAP's 100%-restricted-unit condition on Average Income as clearly resolved for a 9% deal. The QAP states that condition under the 4% paragraph specifically; whether it also governs a 9% Average Income election is not addressed in the QAP's own text and should be confirmed with MBOH directly.
- HUD
- LIHTC
- State QAPs
- IRS § 42
- Housing Finance Agencies