Restricted rents and the operating pro forma — Nevada

Income and rent limits: a table the QAP never names

The Nevada Housing Division (NHD), a division of the Department of Business & Industry, administers the state's 9% and 4% Low-Income Housing Tax Credit programs under NRS Chapter 319, NAC Chapter 319, and IRC Section 42. The current Qualified Allocation Plan is the 2026 QAP, adopted December 24, 2025 and amended March 25, 2026 — the same document this guide's cost/construction phase already relies on for NHD's three-checkpoint financial feasibility review (QAP Section 6.6).

A full read of the current QAP's fifty-three pages turns up something worth flagging plainly: the document never uses the phrase "HUD Multifamily Tax Subsidy Income Limits," never cites 26 U.S.C. § 42(g) by number, and states no Nevada-specific income-limit methodology anywhere. Section 6.3's minimum set-aside elections and Section 14's rent-increase rule both simply say "Area Median Income (AMI)" and "Maximum Rent Limit" without naming a source table. That puts Nevada alongside Arizona, Indiana, New Hampshire and Florida in this guide's own multi-state findings: absent a stated override, the operative table is the same annual federal release — HUD's Multifamily Tax Subsidy Project (MTSP) income limits — every other state's 9% and 4% program runs on. That is an inference from the QAP's silence, not a citation to a Nevada rule, and is worth a direct confirmation with NHD before wiring a Nevada rent engine to MTSP data on the assumption that no state table exists to override it.

Rent has one more Nevada-specific gate before it reaches the pro forma. Section 6.1's Market Study threshold — already documented in this guide's site-screening phase for its occupancy and competitive-impact tests — carries a third, independent trigger that belongs here instead: an application is ineligible if "the rents for the proposed project are equal to or greater than comparable market-rate housing." A rent roll that clears the federal maximum-rent computation but prices at or above the local market comparable fails this threshold regardless of what the AMI math says.

The financial feasibility standards behind NHD's three checkpoints

This guide's cost/construction phase already covers the shape of NHD's review — three separate feasibility passes, at application, prior to Carryover Allocation, and at final cost certification, with the last one handed to the deal's own CPA rather than re-priced by the Division. The standards those three passes actually test are the pro forma's own operating assumptions, and Section 6.6 states them as a flat list applying "for both 9% and 4% unless otherwise indicated":

Two things on that list are easy to miss. First, the 1.15x figure is a floor only — this session's full-text read of the current QAP found no maximum debt service coverage ratio anywhere, for either credit type; a deal that clears 1.15x by a wide margin faces no QAP-level ceiling the way some states cap excess cash flow. Second, a Mixed Use project carries a separate, higher DSC floor of its own: Section 4.7 requires that "the nonresidential components must generate a minimum debt service coverage ratio of 1.20x based on underwriting separate from the housing" — layered on top of, not instead of, the 1.15x residential floor, and tested against its own separate pro forma.

Section 6.6 also constrains what can sit on the sources side of a feasible pro forma: a project may not include uncommitted gap financing unless it is part of a consolidated Division application for HOME, HTF, TSTC or GAHP funds submitted alongside the tax credit request. Uncommitted funds from any other source simply do not count in underwriting, and if the resulting gap exceeds what a reduction in paid developer fee or a sponsor loan could reasonably close, the QAP's own language is blunt: "the application will be deemed infeasible." The developer fee cap (15% of eligible basis or Total Development Cost, depending on credit type) and the acquisition/rehabilitation deferred-fee test are already covered in this guide's cost/construction phase; the pro forma consequence worth adding here is that any deferred fee modeled as a financing source must be paid in full by year 15 of the compliance period — the same year the operating pro forma's own deferred-fee balance needs to hit zero.

Reserves: the number NHD actually sets, and the two it doesn't

Exceeding any of those minimums by more than 20% requires additional supporting documentation in the application. The reserve must sit in a separate account subject to NHD monitoring, and the QAP is explicit that the money "must be used exclusively for their intended purpose and may not be removed or transferred to any other entity" — worth modeling as a hard line item a refinance can't casually raid.

What the QAP does not set anywhere in its current text is a dollar figure for a lease-up reserve or an initial operating reserve. Section 17, titled "Lease-Up Requirement," turns out on a full read to be a notification duty, not a reserve: it requires the Project Sponsor to contact the Division before the earlier of the first building's certificate of occupancy or any lease-up, so NHD can run a mandatory orientation for the sponsor and the on-site property manager — nothing about funding a lease-up account. The closest the QAP comes to an operating-cost benchmark is Section 9's review trigger: "the Division may request a written justification for Applications with operating expenses higher than $550 per unit/month including the funding of reserves" — a threshold that invites scrutiny, not a cap that disqualifies an application, and not itself a reserve requirement. A Nevada pro forma's lease-up and operating reserve lines are therefore set by whatever the permanent lender, syndicator, or HOME/GAHP co-funder actually requires at closing, not by the QAP — a tool that hard-codes a specific Nevada lease-up or operating reserve figure is working from an assumption NHD's own document does not supply, and that gap should be flagged to the user rather than filled with a plausible-looking number.

Utility allowance: a survey-first method, with a scoring incentive to avoid needing one

Section 10 makes the utility-allowance survey the default method, not a fallback: "Applicant/Co-Applicants must estimate the amount of utility allowance by providing a survey of actual utilities being paid in the area or, with Division approval, either use the HUD Utility Model or an alternate method." The survey itself carries five specific conditions — it must (1) have been conducted within 12 months of the application, (2) use units within 10% of the square footage located within a 50-mile radius of the proposed project, (3) include a sample of at least 10 units, (4) use the same energy source proposed for the project, and (5) report the address and square footage of every unit surveyed. Reaching for the HUD Utility Schedule Model or any other alternate method requires Division approval first — it is not an applicant's free choice the way it is in some other states' QAPs.

Nevada also gives a project a way to avoid the utility-allowance subtraction altogether, and ties real points to it: Section 7.3.9's Superior Project scoring awards 2 of its 21 maximum points where the "Project Sponsor will pay electric, gas, and heating and/or cooling utility charges" — an owner-paid-utilities project has no tenant utility allowance to estimate, survey, or defend, and scores for structuring it that way. Section 7.4.1's Low Rent Targeting scoring pulls in the same direction from the rent side: points are awarded by multiplying each restricted unit's share of the total by its rent-income-level percentage, so a project whose weighted-average unit prices below 40% of AMI earns the maximum 6 points, sliding to 2 points in the 45%-to-under-50% band — rewarding exactly the combination of a low AMI election and a conservative utility allowance that a real pro forma has to reconcile against actual NOI.

Once the project is operating, Section 14 caps how fast rent can chase a rising Maximum Rent Limit: increases aren't allowed mid-lease and then only once annually, and even an annual increase can't exceed 10% for a family property or 5% for a senior property regardless of how far the published limit moved — though that increase cap "does not apply to LIHTC projects subject to the 2022 QAP and earlier," and a project may apply for a financial hardship waiver if the cap itself threatens the deal's viability. A rent-escalation assumption modeled purely off the 2%-per-year income-growth figure in Section 6.6 can understate what's actually achievable in a year the federal limit jumps sharply, or overstate it if the 10%/5% ceiling binds first.

The Average Income Test's real mechanics, in Appendix B

Section 6.3's third election — "in compliance with the average income test" — reads as a single line, but Appendix B, "Income Averaging Policy," attaches real, specific mechanics NHD will actually enforce. Eligibility is the first gate: only 100%-restricted properties may elect it — a property with any market-rate units, including a Mixed Income Residential project under Section 4.6's 10%-market-rate minimum, cannot use it — and a re-syndication of a property with a recorded Declaration of Restrictive Covenants (DRC) is ineligible outright, regardless of how the new application designates units.

The unit-by-unit designation is locked early and administratively: Applicants designate units at a specific AMI by unit type at application, and the DRC that gets recorded carries only a general provision about the election rather than the unit-by-unit specifics, so an owner needs NHD approval through the Project Concept Change process to change any designation before the property reaches full occupancy. For a multi-building development, the ownership entity elects to treat every building as part of one multiple-building project on Form 8609 by checking "Yes" on Line 8b.

Two provisions protect an owner from a single leasing mistake collapsing the whole election. First, leasing to an over-income household, or exceeding the maximum housing expense, "does not automatically increase a unit's percent designation." Second, absent contrary IRS guidance, NHD "will not report a property as failing the income averaging minimum set-aside so long as 40% of the total units comply with whatever are the designations for each" — a stated safe harbor tied to the federal 40% floor, not a NHD-specific relaxation of it. The Next Available Unit (NAU) rule triggers when a tenant's income exceeds 140% of 60% AMI (for a unit designated at 60% AMI or below) or 140% of the unit's own designated target (for a unit designated above 60% AMI); once triggered, the income and rent restriction on the next available comparable or smaller unit is set by the imputed income limit of the unit currently occupied by the over-income tenant if that next unit is market-rate, or by the next unit's own imputed limit if it is already a LIHTC unit.