Site control and due diligence — Illinois

Site control: the instrument, its content, and what disqualifies it

Every Site in an Application has to carry acceptable site control, and IHDA allows only three forms: a fee-simple interest in the Sponsor's or Owner's name; a fully executed, binding agreement with a term ending no sooner than six months after the Application deadline, signed by the seller (or the seller under a 99-year-or-longer ground lease, or a seller donating the land or building); or, where a governmental entity owns the Site, a letter of intent to sell, donate, or long-term-lease that stays valid at least six months past the Application deadline. Whatever form is used, the instrument must contain no preemptive termination language — a seller cannot retain the right to walk away from the agreement before that mandatory term runs.

Where a Sponsor or a related third-party entity will purchase the Site and later convey it to the actual Project Owner, the Application has to disclose the expected sale or lease price, the proposed conveyance dates, and the reason for the conveyance — and the seller still cannot terminate the underlying agreement before the mandatory six-month term.

Zoning documentation: three tracks, all keyed to the two-year Placed-in-Service clock

IHDA's Application requires proof that every Site is either already zoned for the proposed use or on a credible path to being zoned through a Planned Development or Planned Unit Development ("PD/PUD") process — and that path has to run "in a timeframe compatible with the project's two-year Placed in Service date." There are three documented tracks. A Site that's already zoned needs either a valid building permit or a letter from the local zoning administrator (or, in localities without one, the chief elected official) stating the Site's location, its current zoning and any special-use designation, a description of the Project, and an explicit statement that current zoning permits it.

A Site awaiting a re-zoning, variance, or special-use approval needs a similar letter, but with six elements instead of four: location, project description, a written explanation of the approval process, evidence the process has actually been initiated, evidence of what stage it has reached, and evidence — including any available dates — that it will be reviewed in a timely manner. A Site headed through a PD/PUD process needs a parallel six-item letter addressing whether the PD/PUD already exists or has yet to be established, plus a description of any amendments still required if it already exists.

This phase's due-diligence job is documentation, not doctrine — confirming the zoning administrator will actually issue one of these letters, and that its stated timeline can plausibly clear before Application and still land inside the two-year Placed-in-Service window. The deeper legal question of which body of law that zoning action rests on — home rule police power versus a state-delegated zoning statute — determines how much that timeline can be trusted, and is covered in the entitlement-pathway-election phase.

Site physical information: floodplain, wetlands, mining, and seismic — one Illinois-only hazard

The mining and subsidence-insurance requirement is the one hazard layer on this list that most other states' screens simply don't carry — a legacy of the coal geology under parts of central and southern Illinois. It is triggered by a county's inclusion on IHDA's own published Illinois Mine Subsidence Insurance Fund Map, not by a Sponsor's independent judgment about whether mining is still active nearby.

Separately, every Project must meet the National Historic Preservation Act and the Illinois State Historic Resources Protection Act, reviewed by the State Historic Preservation Office inside the Illinois Department of Natural Resources (IDNR). Where federal funds are involved, IHDA must submit a review request to IDNR before initial closing, and there is a mandatory 30-day review period to obtain an approval letter — a requirement the QAP notes is mandated by state statute for every Project, regardless of type, location, or actual historic character.

Market Study and Phase I: firm qualifications, currency windows, and no cure-later path

The Site and Market Study has to come from a firm that's a member of the National Council of Housing Market Analysts (NCHMA), accompanied by general liability, auto, and workers' compensation insurance certificates and a completed Site and Market Study Summary Form. It must be no more than nine months old at submission, with an update permitted up to twelve months beyond that expiration — but any substantive Project change (unit count, mix, income restrictions, or targeting) can nullify the permission to simply update rather than redo the study. Penetration and capture rates must conform to IHDA's own standard methodology; an alternative methodology is allowed only alongside it, not instead of it.

A market approval reached during PPA is not locked in. IHDA can reverse it at Application if, among other things, the Authority's own investment in the Primary Market Area has grown since PPA, Project or market details weren't disclosed at PPA, a unit-mix or rent change has a negative market implication, market conditions or demographics have shifted, or occupancy at comparable affordable properties is declining. And on the scoring side, Market Characteristics works differently from every other category: an Application "will only be permitted to self-score a zero," with the real score — from negative three to positive three — set solely by IHDA's own review of the market, not the quality of the study document itself.

The Phase I Environmental Site Assessment must be no more than one year old at the Application deadline, prepared to IHDA's Design, Construction & Regulatory Compliance Requirements (DCRC). If a Phase II already exists, it has to be submitted with the Phase I, along with a narrative explaining any Recognized Environmental Condition (REC), how it will be addressed, and its cost — all budgeted into the development budget in the same Application. There is no "flag it now, fix it after award" path: IHDA reserves the right to require an environmental contingency or to modify the construction scope based on that same narrative.

Physical Needs Assessment and the $40,000-per-unit rehabilitation floor

Any Project involving rehabilitation of an existing structure needs a third-party Physical Needs Assessment (PNA) reflecting the property's actual existing conditions. The proposed scope of work must address every item the PNA flags as "Critical" or "Immediate" — meaning due within five years — and items in the PNA's five-to-seven-year capital needs schedule have to be either folded into the current construction scope or funded through a reserve budget sized to those same timeframes.

Beyond the PNA itself, every Tax Credit Application involving rehabilitation must budget at least $40,000 in hard construction cost per unit and include a defined minimum scope: replacement of all unit and common-area kitchen and bathroom cabinets and countertops; replacement of all plumbing fixtures and all light fixtures to DCRC specifications; replacement of all flooring with FloorScore-certified product; repair or replacement of at least one additional major system beyond 90% of its useful life (furnaces, water heaters, boilers, air conditioning, elevators, windows, roofing, or exterior tuckpointing, among others); and painting of all units and common areas. IHDA may waive any of these items based on the PNA, but any requested deviation needs a detailed narrative, and IHDA reserves the right to modify the construction scope after reviewing it.

If a Site is occupied by residential or commercial tenants as of the Application date, the Application must demonstrate the Project will not cause permanent displacement and must include a relocation plan meeting IHDA's Relocation Checklist and the Uniform Relocation Act's tenant-notice requirements, with a dedicated Relocation line in the development budget. IHDA's own guidance recommends that Sponsors consult a tax accountant or attorney before including relocation costs in eligible basis.

Appraisal and utility allowance: the methodology documents that live outside the QAP

An acceptable IHDA appraisal is a Summary or Self-Contained Appraisal Report conforming to USPAP (the Appraisal Foundation's Uniform Standards of Professional Appraisal Practice), prepared by a Certified General Real Estate Appraiser licensed in Illinois, with IHDA listed as an intended user and a physical site inspection performed. IHDA's own Appraisal Scope and Guidelines call for up to ten distinct values in a single report — as-is market value at restricted and at market rents, as-is land value, as-if-completed and as-if-completed-and-stabilized values at both restricted and market rents, insurable value, and (where applicable) the separate value attributable to the Tax Credits and to any below-market financing — using the Income Approach for existing properties and the Sales Comparison Approach for vacant land, with favorable financing terms and Housing Tax Credits excluded from the capitalization rate or as-is value determination.

IHDA will accept an appraisal (including one from HUD or USDA Rural Development) dated no more than six months before the funding Application deadline; beyond that window, an update letter is acceptable if there's no material change to the development or market and the update itself meets USPAP standards. Appraisers must carry $1,000,000/$2,000,000 professional liability insurance, disclose any identity of interest with the development team, and Applicants are directed to make a proactive effort to retain a Minority Business Enterprise-certified appraiser.

This guidance document itself is worth flagging: IHDA's "Illinois Housing Development Authority Appraisal Scope and Guidelines" carries a December 2015 date even in the copy currently hosted (re-uploaded to IHDA's site in July 2025) and linked as the Authority's live standard. This research could not confirm whether its underlying content has been substantively revised since 2015 despite being what IHDA currently enforces — that should be checked directly with IHDA's Multifamily Financing staff before relying on any specific numeric or procedural detail in a live deal, rather than assumed to be current simply because it's the version presently linked.

Utility allowances run on a separate track entirely, governed by IHDA's own Instructions for Annual Submission of Rent Schedule and Utility Allowance Request (revised October 20, 2025, effective January 1, 2026), which offers four calculation options: the HUD Multifamily Housing Utility Analysis (12 consecutive months of actual per-unit usage, with a minimum sample size that scales by unit count on a published table, after which the property can rely on HUD's published Annual Utility Allowance Factors for up to two years before resampling); the HUD Utility Schedule Model (HUSM); a local Public Housing Authority's own utility allowance schedule (with a specific caution to check whether it separately itemizes a gas fixed charge or surcharge); and an "Other" option requiring 12 months of actual usage sampled at 10% of units per bedroom size or a minimum of eight units, whichever is greater. Submission timing itself varies by funding source: 120 days ahead of the effective date for HOME/National Housing Trust Fund properties and for Section 811 Project Rental Assistance, and 90 days ahead — with data no older than 60 days — for every other program.