Financial Review of HOME-LIHTC Projects

The financial review process for a HOME-LIHTC project is substantially the same as it is for a project funded with HOME funds alone. The PJ’s financial feasibility analysis involves:

  • Evaluating the development-related expenses and the availability of funds to develop the project
  • Making predictions about the future operating expenses and revenues to anticipate the long- term viability of the project
  • Analyzing the financial data, the impact of HOME and LIHTC requirements, and economic and market trends, in order to make decisions about how much HOME funds to invest, and what terms and conditions of funding to impose.

For the PJ, it is important to make realistic, if not conservative financial judgments. This helps ensure that the development of the project will be completed and the project will yield the revenues it needs in order to be sustained throughout the affordability period, while complying with the HOME Program’s occupancy and rent restrictions.

This chapter assumes that the reader has a basic understanding of project underwriting for affordable housing. For more information on underwriting, see the Underwriting HOME Rental Housing Guide. This publication is available online at"

The PJ underwriter may save time and be more thorough in its financial analysis if it reviews and understands the state’s underwriting standards. These are typically available in the QAP. These standards explain the state’s financial requirements for tax credit projects, such as requirements for the maximum total development cost, replacement reserves, operating expense levels, and first mortgages. These QAP requirements may be inconsistent with PJ requirements, and the PJ needs to decide how to resolve the differences and how to respond to questions from developers about these differences. To the extent feasible, PJs should seek to minimize any conflicts between PJ underwriting requirements and underwriting requirements in the state’s QAP.

Coordinating the PJ’s and State’s Financial Feasibility Review

It is a best practice for the PJ and the state allocating agency to coordinate with each other regarding underwriting requirements and determinations. This practice is likely to improve the accuracy of both underwriting analyses, and is necessary to ensure the appropriate level of total assistance to projects.

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