"A signed purchase contract got me through pre-application -- what actually counts as site control at full application, and which diligence items can wait until after I'm awarded?"
What KHC accepts as site control -- and the fine print that disqualifies it
KHC requires site control on 100 percent of a project's sites, including scattered sites. Site control documents must be fully executed and sufficiently identify the property; real property conveyances must be recorded with the appropriate county clerk, and leasehold estates must meet IRS requirements and run longer than KHC's affordability and mortgage periods.
| Form | Key conditions |
|---|---|
| Property Deed | Can be titled to the project ownership entity, or to the general partner (or a member of the general partner) of a to-be-formed ownership entity |
| Current Purchase Contract | Valid through the announcement period of the calendar year in which credits would be awarded; cannot contain a seller's right of first refusal; applicant must be able to prove the ability to purchase the property at all times until closing; KHC may require supplemental proof if the contract risks expiring before closing |
| Current Option to Purchase | Same validity window, right-of-first-refusal prohibition, and proof-of-ability requirements as a purchase contract |
| Current Lease Agreement / Option to Lease | The lease period must run through the entire applicable affordability period |
For federally funded projects, the new owner may not take legal possession of the property until after environmental clearance -- unless the deed transfer or lease was executed before the KHC funding application was submitted, which makes the sequencing choice on federally funded deals matter well before due diligence formally starts. Applicants must also submit a copy of any deed restrictions or subdivision restrictions currently on the property, or a letter from the seller, a city/county official, or a title attorney confirming none exist.
Title work threads through the rest of the process rather than concluding at application: a draft title commitment is due at Technical Submission, a revised commitment or proforma policy is required again at pre-closing, and the final title insurance policy follows after closing, with KHC named as an insured party where KHC funds are involved.
Kentucky's environmental review is a federal process -- no independent state-level review was found
This research reviewed KHC's 2027-2029 QAP and 2027 Multifamily Programs Guidelines and did not find any Kentucky state statute or KHC-administered process establishing an independent state-level environmental review comparable to a state EIS or "mini-NEPA" law. Every environmental review provision in the materials reviewed is framed in terms of the federal National Environmental Policy Act (NEPA) and its implementing regulations at 24 CFR Part 58 -- this should be read as "not found in the materials reviewed" rather than a confirmed absence, since it was not independently checked against the full body of Kentucky environmental statutes.
The federal review KHC does administer is triggered specifically by HOME, NHTF, Risk-Sharing funds, new project-based vouchers, and transfers of an existing Section 8 Housing Assistance Payments contract. The borrower must contract with a KHC-approved Environmental Compliance Service Provider, and the owner may not take possession of the property, begin any part of construction, or disturb the soil in any way until KHC issues an environmental clearance letter -- again, unless the deed transfer or lease predates the funding application. National Housing Trust Fund (NHTF) projects follow a related but separate track: NHTF environmental provisions (24 CFR 93.301(f)(1)-(2)) are similar to the HOME/Part 58 process and are governed by HUD CPD Notice 16-14, but NHTF reviews are not reported through HUD's HEROS system -- the completed Environmental Review Record is instead uploaded through KHC's UFA system at the pre-closing stage. A project combining NHTF with HOME or other federal funds must complete a fully separate environmental review for each funding source.
For HOME, NHTF, and Risk-Sharing projects, an A-95 Clearinghouse letter from the Kentucky Department for Local Government (DLG) confirming the project has cleared review is required before the environmental process can proceed -- this is the closest thing to a state-level environmental gate identified in this research, but it operates inside the federal NEPA framework as a state clearinghouse function, not as an independent parallel state review.
Historic properties add a separate track: rehabilitation of a historic property requires a clearance letter from the Kentucky Heritage Council's State Historic Preservation Office (SHPO), and federally funded projects must contact SHPO regarding Section 106 if the DLG Clearinghouse letter flags a need for an archaeological survey or notes the structure may be over 50 years old or eligible for Historic District recognition.
Because every environmental-review trigger identified in this research is tied to a specific federal funding source, a Housing-Credit-only application with no HOME, NHTF, Risk-Sharing, or Project-Based Section 8 component was not found, in the materials reviewed, to carry any independent environmental review requirement at all. That gap should be confirmed directly with KHC's environmental review team (environmentalreview@kyhousing.org) rather than assumed either way before a Housing-Credit-only deal skips environmental diligence.
Phase I / Phase II ESA -- triggered by unit count and funding source, not required on every deal
A Phase I Environmental Site Assessment is required for all new construction projects of more than four units that include HOME, NHTF, Risk-Sharing, and/or Project-Based Section 8 funding as any part of the funding stack; KHC also reserves the right to request a Phase I on any project regardless of funding source. Preparers must be experienced in the field and current on related federal and state law, and reports must meet ASTM E1527 and ASTM E1528 standards. The Phase I result determines whether a Phase II is required. Both are due at Technical Submission, not at the full application -- meaning a Kentucky project can receive a preliminary award before its Phase I has even been ordered, provided the report lands before that project's individually set Technical Submission deadline.
Rehabilitation or adaptive reuse of buildings built before 1978 triggers a separate lead-based paint track: a Lead-Based Paint Determination form at application, with the underwriting model budgeted for anticipated assessment, abatement, or clearance costs, followed at Technical Submission by a full inspection and assessment (or documented proof of prior abatement) and an EPA Lead Compliance Certification confirming Renovation, Repair and Painting (RRP) Rule compliance.
Floodplains and wetlands: a hard line for new construction, an insurance requirement for existing buildings
| Flood zone | Description | Flood insurance required? |
|---|---|---|
| Zone A | 100-year floodplain | Yes |
| Zone B / Zone X (shaded) | Area between the 100- and 500-year floodplains | Yes |
| Zone C / Zone X (unshaded) | Area outside the 500-year floodplain | No |
| Zone D | Areas with undetermined flood hazards | Yes |
Flood insurance means coverage through the National Flood Insurance Program (NFIP); projects outside an NFIP-participating area are ineligible. KHC requires coverage equal to at least the full amount of KHC funds invested if KHC holds first lien position, or the full replacement value of the property otherwise, with KHC named as an insured.
For new construction, every portion of the site essential to tenant use -- buildings, parking lots, the development's entrance, recreational areas -- must sit outside the floodplain. Unused green space on the site may remain in the floodplain only if the owner provides written assurance that portion will never be developed. A new-construction site with a mapped or potential wetland requires contacting KHC for guidance on the federal 8-step decision-making process, unless an exception under 24 CFR Part 55.12 applies.
Rehabilitation of currently occupied rental housing with any portion of the property in a floodplain must carry federal flood insurance; if the portion in the floodplain isn't essential to tenants, the owner can instead subdivide the plat and record a new deed to remove that portion from the project site, avoiding the insurance requirement. Rehabilitation of a vacant structure that sits in a floodplain is not eligible at all, regardless of insurance.
A floodplain map is required with the full application: either a FEMA Firmette showing project structures and other essential site portions are outside the floodplain (plus a signed, stamped, and dated survey if any portion of the property is in the floodplain), or -- if the site was previously in a floodplain but has since been built up -- a licensed surveyor's report of reclassification together with a FEMA Letter of Map Amendment showing all land to be used for project structures is now at least one foot above the floodplain. KHC's guidelines state explicitly that a map or information generated from a local jurisdiction's own database is insufficient on its own.
What due diligence misses if it stops at the deed: soils, utilities, and property-tax exposure
New construction projects must submit, at Technical Submission, a Subsurface Soils Investigation Report from a soils engineer, including a site plan showing the soil boring locations within building footprints, the test results, and footing design recommendations. New construction also requires utility letters from local utility companies confirming availability and capacity at Technical Submission; if a municipality is extending utilities to the site, the letter must state the start and completion dates, the anticipated cost, and confirm the municipality bears that cost, and if the developer is extending utilities instead, either that work must finish before KHC funds are drawn or the funds must be held in escrow.
One due-diligence item is easy to miss entirely because it isn't a KHC checklist item -- it's a state statute. Under KRS 132.191, Kentucky's Property Valuation Administrators (PVAs) must value multi-unit rental housing that is subject to a government use restriction (which includes LIHTC-restricted housing) using one of two specific methods: an income approach applying a capitalization rate set 50 to 150 basis points above the most recent quarterly national average multifamily cap rate (as published by realtyrates.com or a successor, with the Kentucky Department of Revenue publishing the applicable range each year), computed without treating Section 42 or other tax credits as income; or a ratio adjustment of the property's unrestricted market value based on the ratio of its restricted average rent to comparable unrestricted market rent. Owners must notify the PVA in writing within 60 days of a property becoming or ceasing to be restricted, or of a foreclosure action, or risk a penalty of up to $200. Pulling this statutory valuation approach into a site's underwriting during due diligence can materially change the projected property-tax line versus assuming an as-if-market-rate assessment.
The clocks that matter after site control is in place
KHC gives applicants 18 months from the date of its preliminary approval letter to close with the equity investor, bond purchaser, permanent/construction lenders, and on all KHC loans -- after which the award expires and becomes null and void. Inside that window, all pre-closing documents must be uploaded at least 30 days before the desired closing date; executed originals of KHC loan documents sent for recording must reach KHC within 48 hours of closing, with the recorded originals following within two weeks; and the executed deed or lease and the executed limited partnership agreement (with all referenced exhibits) must be uploaded within two weeks of closing.
Where this goes wrong
- Letting a purchase contract's validity window run out before the full application deadline -- KHC requires the contract stay valid through the announcement period of the award year, and a contract timed only to survive pre-application can lapse before it's actually needed.
- A purchase contract or option containing a seller's right of first refusal -- this alone disqualifies it as valid site control under KHC's guidelines, regardless of how current the document otherwise is.
- Assuming a Housing-Credit-only application (no HOME/NHTF/Risk-Sharing/Project-Based Section 8) triggers the same federal environmental review as a HOME-layered deal -- the materials reviewed tie the NEPA/Part 58 process specifically to those funding sources, and this gap should be confirmed with KHC's environmental review team rather than assumed either way.
- Taking legal possession of a federally funded site before environmental clearance is issued -- allowed only if the deed transfer or lease was executed before the KHC funding application was submitted.
- Skipping the Phase I ESA because a new-construction project is under the four-unit threshold -- KHC can still request one on any project at its discretion.
- Submitting a local jurisdiction's own floodplain database printout as proof -- KHC's guidelines state this is explicitly insufficient; only a FEMA Firmette or a licensed surveyor's certification satisfies the requirement.
- Planning to rehabilitate a vacant structure that sits in a floodplain -- categorically ineligible under KHC's guidelines, regardless of flood insurance coverage.
- Missing the 60-day PVA notification window under KRS 132.191 when a property's restricted status starts, ends, or a foreclosure occurs -- a state-law penalty of up to $200 attaches, and it can delay the LIHTC-specific valuation treatment the statute otherwise requires.
- Assuming the 18-month closing clock starts at application submission -- it starts at the date of KHC's preliminary approval letter, which comes after both pre-application and full application.
- HUD
- LIHTC
- State QAPs
- IRS § 42
- Housing Finance Agencies