"We have an executed purchase agreement -- does it actually cover MSHDA's 120-day window from the funding round deadline, and do the market study, appraisal, and Phase I clocks all line up with it?"
Nine threshold items, and the clock each one runs on
MSHDA's General Threshold Requirements (QAP Section VII.A, detailed in Exhibit I) list twenty-five items that apply to every project unless an Addendum, Policy Bulletin, or waiver says otherwise, and the QAP states plainly that "proposals not meeting threshold requirements will not be processed further." The items most relevant to due diligence -- Site Control, Zoning, Utilities, Market Study, Environmental, Title Insurance Commitment, Financing, and Acquisition Transfer -- each carry their own documentation standard and their own currency window, all measured back from the same funding-round due date.
| Item | Window | Key requirement |
|---|---|---|
| Site Control | In effect for 120 days from the application due date (extendable) | Exclusive option, land contract, offer to purchase, purchase agreement, or long-term lease; must be unilaterally assignable to the proposed owner if held by another entity; must match the title commitment |
| Zoning | Dated within 1 year of the funding round deadline | Evidence from the local governing body of current zoning designation, and what steps (if any) are underway to obtain proper zoning if not already in place |
| Utilities | Dated within 1 year of the funding round deadline | Local government/utility confirmation of electric, gas, water, sewer, and high-speed internet capacity; Urban new construction/adaptive reuse/substantial rehab must also pre-wire EV-charging-ready conduit and panel capacity for at least 5% of units |
| Market Study | Dated within 10 months of the application deadline | Completed per MSHDA guidelines (Tab C of the Combined Application); applicant must attest the study is materially consistent with the LIHTC submission |
| Environmental | Phase I ESA within its 180-day ASTM validity period | Per MSHDA's current Environmental Review Standards (Tab D); MSHDA may reject an application if review or supporting documentation doesn't meet its standard, or require additional testing |
| Title Insurance Commitment | Dated within 6 months of the funding round deadline | Owner name must match site control docs; all parcels must match the application; signed by an authorized agent; underwriter availability confirmed |
| Financing | Commitment documents dated within 6 months of the funding round deadline | Applicants may not rely solely on LIHTC equity; must show lender commitments stating loan amount, terms, interest rate, and guarantors |
| Equity Investor Letter | Dated within 1 month of the funding round deadline | Amount, price, and terms of the LIHTC equity investment; investor certification of development-team financial review where relying on Policy Bulletin #7 |
These windows do not share a single trigger date -- Site Control counts from the application due date, most others count back from the funding round deadline, and the Equity Investor Letter's one-month window is the tightest of all. A due-diligence tracker built around a single 'application date' column will misstate several of these.
Acquisition Transfer applies specifically where a property is currently regulated by another government body -- HUD, USDA RD, the BIA, or MSHDA itself -- and requires a statement of what approval that transfer needs and how the applicant intends to obtain it on the LIHTC timetable. For a preservation deal layered on an existing USDA RD 515 or HUD-assisted property, this item and the Capital Needs Assessment discussed below tend to move together.
Appraisals: USPAP, a Michigan Certified General Appraiser, and land value capped at the lesser of two numbers
MSHDA's Guidelines for MSHDA Appraisals (Tab QQ of the Combined Application, dated August 2014 and still the current posted version as of this research) set three baseline requirements: appraisals must be complete, self-contained reports prepared under the Uniform Standards of Professional Appraisal Practice (USPAP); the appraiser must be licensed by the Michigan State Board of Real Estate Appraisers as a Certified General Appraiser; and the report must be delivered electronically. Beyond that floor, MSHDA is explicit that "all appraisals are delivered subject to MSHDA's approval as to their quality and appropriateness to the particular circumstance," and MSHDA may request revisions or reject an appraisal outright.
The guidance goes further than a generic USPAP restatement on issues specific to regulated affordable housing. It instructs appraisers that the income approach is often the only appropriate method for a rent-restricted property, that comparable-sales analysis should generally avoid related-party transactions or sales involving significant government subsidy, and that the cost approach is rarely applicable at all since many LIHTC properties could not be replicated today under current programs. It also flags a specific, real valuation trap: a property with an above-market, long-term project-based Section 8 contract should not simply have a capitalization rate applied to the above-market income stream (which overstates value by assuming that income is stable indefinitely), nor should it be valued purely off comparables lacking that contract (which understates the value of the subsidy stream) -- MSHDA points appraisers toward separating the above-market income component out via a discounted cash flow, similar to how a typical A/B loan structure would size the deal.
On land valuation specifically, the guidance states directly: "the value of the land included in project cost shall not exceed the lesser of its appraised value or the purchase price." For in-kind land contributions, the value of the contribution must itself be supported by an appraisal. MSHDA's default is an as-is appraisal; post-rehabilitation values are requested only in specific circumstances (chiefly where MSHDA's role is as lender rather than as allocator, since post-rehab value has little relevance to an allocation decision).
Capital Needs Assessment: a real physical-inspection standard for every acquisition/rehab deal
MSHDA's Tax Credit Capital Needs Assessment Requirements (Tab Z of the Combined Application, dated June 20, 2008 and still the currently posted version) require a third-party CNA, dated within one year of the application due date, on every acquisition/rehabilitation project including preservation deals. The physical-inspection standard is specific and unusually detailed for a QAP-adjacent document: a minimum of 10% of units individually inspected on developments of 150+ units, or 15% on developments of 149 or fewer, with every unit type represented in the sample; a licensed expert's evaluation of the life-cycle condition of central HVAC, plumbing/electrical systems, structural integrity for buildings over three stories, elevators, and roofs; and inspection of every common area and site component (walks, parking, lighting, landscaping, grading, dumpster areas).
The financial-analysis instructions are equally specific: the CNA's projections must assume $0 is currently available for repairs and replacement, must assume all eligible replacement-reserve items are funded from the replacement reserve rather than operating cash flow, and must project needs annually for the first five years, then grouped through years 8, 12, and 15 -- the full 15-year LIHTC compliance period. MSHDA's format requirements reject a shortcut some sponsors might otherwise be tempted to submit: "a simple checklist showing the items that need replacing, without any costs included will not be accepted." Each report needs at least six labeled photographs, a replacement-reserve sufficiency analysis, and confirmation that any 504/ADA accessibility modifications needed are included in the scope.
Utility allowances: multiple permitted methods, but not all of them at every stage
Michigan implements the utility-allowance methods added to Treasury Regulation Section 1.42-10 in 2008: alongside the traditional RHS/HUD utility charts, PHA utility schedules, and local utility company estimates, MSHDA administers its own Agency Estimate method (a sampling of actual tenant utility bills, submitted by the owner) and a HUD Utility Model option. MSHDA's current Agency Estimate policy (LIHTC Compliance Bulletin #9, most recently revised in July 2026) runs on an annual calendar keyed to a January 1 implementation date: utility-bill sampling begins around August 1 (150 days out), the completed utility package is due to MSHDA by October 1 (90 days out), and approved changes take effect the following January 1. A property must post any proposed change to all tenants regardless of whether rent will actually change.
One rule matters specifically at the application/underwriting stage rather than only at post-award compliance: new-construction developments are not permitted to use the Agency Estimate method for underwriting purposes, since there is no existing tenant billing history to sample -- a new-construction pro forma has to be built on RHS/HUD charts, a HUD Utility Model run, or a utility company estimate instead. MSHDA-approved utility allowances are valid for twelve months once in place, and an owner must submit a renewal request (or notify tenants of a change) at least 90 days before expiration or risk a compliance finding.
Where this goes wrong
- Building a single due-diligence tracker around one 'application date' when the QAP's threshold items actually run on at least four different clocks: 120 days from the application due date (Site Control), 10 months (Market Study), 6 months (Title, Financing), 1 year (Zoning, Utilities), 180 days ASTM validity (Phase I ESA), and 1 month (Equity Investor Letter).
- Assuming any of MSHDA's twenty-five General Threshold Requirements are treated as minor or curable after submission -- the QAP states that proposals not meeting threshold requirements will not be processed further, and application-completeness decisions are explicitly subjective and within MSHDA's sole discretion.
- Submitting an appraisal from an appraiser who is not specifically a Michigan-licensed Certified General Appraiser, or one not prepared to full USPAP self-contained-report standard -- MSHDA's own guidance sets both as baseline requirements, separate from the appraisal's substantive conclusions.
- Applying a straightforward capitalization rate to an above-market, long-term project-based Section 8 income stream when valuing an acquisition -- MSHDA's appraisal guidance specifically warns this overstates value by treating a time-limited, discontinuous income stream as permanent.
- Valuing acquisition land above the lesser of its appraised value or its purchase price -- MSHDA's guidance states this cap directly, and in-kind land contributions still require their own supporting appraisal.
- Treating a Capital Needs Assessment as a simple deferred-maintenance checklist -- MSHDA's Tab Z standard explicitly rejects a checklist without itemized costs, and requires a full 15-year, phased financial projection assuming zero dollars are currently banked for replacement.
- Understaffing the CNA's physical-inspection sample size -- the required minimum (10% of units on 150+-unit developments, 15% on smaller developments, every unit type represented) is a floor MSHDA states outright, not a suggestion.
- Assuming a new-construction deal can use MSHDA's Agency Estimate utility-allowance method for underwriting -- it is unavailable for new construction precisely because there is no tenant billing history yet to sample.
- Missing the EV-charging infrastructure requirement buried in the Utilities threshold item for Urban new construction, adaptive reuse, and substantial (gut) rehab projects -- conduit, panel capacity, and space reservations sized for at least 5% of units are a threshold requirement, not an optional scoring add-on.
- Assuming a market study or Phase I ESA commissioned early in site control will still be current at submission -- the market study's 10-month window and the Phase I's 180-day ASTM window are both shorter than a typical Michigan pre-development timeline, and MSHDA requires the market study analyst's attestation that it remains materially consistent with the final submission.
- HUD
- LIHTC
- State QAPs
- IRS § 42
- Housing Finance Agencies