Rents, income limits, and the operating pro forma HCR underwrites to — New York

The federal tests NY runs on, and the one NYC exception

DHCR's and HFA's regulations both defer to "whichever minimum set-aside test is applicable" under the Code rather than substituting a state-specific test — so the 20/50 test, the 40/60 test, and the Average Income Test (IRC §42(g)(1)(A)–(C)) are all live elections in New York, exactly as they are federally.

The one real exception is New York City-specific, and it's federal law, not DHCR/HFA policy: under IRC §42(g)(4) (cross-referencing the "high cost housing area" definition at §142(d)(6)), a building in a city of 1,000,000 or more population — meaning NYC — can satisfy the 40/60 minimum set-aside test with just 25% of units at or below 60% AMI, instead of 40%. A fully affordable NYC LIHTC building can clear its federal minimum set-aside with a quarter of its units at 60% AMI; the same building anywhere else in the state needs 40%.

Average Income Test mechanics, and how HPD narrows it further

Under the Average Income Test, units can be individually designated in AMI increments of 20/30/40/50/60/70/80%, so long as the average designation across all LIHTC units doesn't exceed 60% AMI — allowing units affordable up to 80% AMI to count as LIHTC units for the first time. Projects electing this set-aside are required to complete a specific Average Income Minimum Set-Aside worksheet as part of HCR's application materials; the exact citation for that requirement within HCR's application reference materials wasn't independently pinned down in this research and should be confirmed against the current application package before relying on it.

HPD's July 2025 New Construction Finance term sheet applies the same federal rule — "the maximum income limit for a LIHTC unit is 80% AMI and the average income for all LIHTC units in the project must be less than 60% AMI" — and then layers its own, separate funding-eligibility requirement on top: a Target Average AMI of 50–60%, across up to four affordability tiers, calculated across LIHTC and non-LIHTC units combined. A deal can clear the federal 60% AIT average and still miss HPD's funding eligibility if its blended average — including any market-rate or middle-income units — runs above HPD's own ceiling.

Rent-setting itself follows the standard federal formula — gross rent capped at 30% of the applicable imputed income limitation, adjusted for family size, per HFA's own term sheet. NYC restricted units carry a second, ongoing constraint on top of that: subsequent rent increases are governed by the lower of the AMI-indexed increase or the allowable rent-stabilization increase, with no vacancy or luxury decontrol permitted for the duration of the HCR restriction period — a constraint that doesn't exist the same way outside the city.

The operating pro forma numbers HCR actually publishes

Vacancy is the one line HCR doesn't publish as a fixed percentage. HFA's term sheet ties it instead to the independent, HFA-commissioned appraisal and market study, requiring that the appraisal's analysis "be consistent with the analysis of rents and operating expenses presented in the application." Don't underwrite a market-standard 5–7% vacancy factor as if it's an HCR requirement — it isn't published as one, and the number that matters is whatever the appraisal-backed market study supports.

An annual monitoring fee also applies, but it lives in DHCR's standard LIHTC regulatory agreement rather than the QAP rule text itself — the rule at §2040.7(c) only authorizes "reasonable and necessary" administrative fees "as set forth in the project regulatory agreement, the capital programs manual and/or other agency guidance." The regulatory-agreement language itself sets that fee at 0.5% of the maximum restricted rents of the project's low-income portion, payable annually, or "such other fee as DHCR may prescribe" — worth confirming against the specific regulatory agreement a deal will sign, not assumed from the QAP alone.