Tap to get financing
HUD Loans
HUD Loans
Loan Programs
FHA & HUD LoansHUD 221(d)(4)HUD 223(f)HUD 223(a)(7)HUD 241(a)HUD 232/223(f)
Calculators
Break-Even Ratio CalculatorCap Rate CalculatorCash-on-Cash Return CalculatorCommercial Mortgage CalculatorDebt Yield CalculatorDSCR CalculatorLoan Repayment CalculatorLTV CalculatorNOI Calculator
Resources
BlogLoan DocsHUD REAC InspectionsHUD Section 202 Supportive HousingHAP Contracts2021-2022 HUD Multifamily Basic Statutory LimitsFrequently Asked Questions
About
CompanyLeadershipTeamWe're Hiring
Contact Us
Get financing
Was This Article Helpful?
Newly Published
Oct 5 at HUD Loans
HUD’s New Surplus Cash Distribution Changes
Oct 3 at HUD Loans
What Are Replacement Reserves?
Sep 12 at HUD Loans
Is HUD Financing Available for Assisted Living Facilities?
Explore the Janover Network
Feb 2 at Multifamily Loans
Top 10 Fannie Mae Multifamily Lenders of 2023
Jan 31 at Commercial Real Estate Loans
Top 10 Commercial Property Management Companies of 2023
Jan 30 at Commercial Real Estate Loans
Top 5 Markets for Medical Office Investing in 2023
HUD Multifamily Loans Blog
Last updated on Dec 8, 2022
2 min read
by Jeff Hamann

What Is Total Development Cost?

It’s critical to understand how the total development cost plays a part in determining a project’s eligibility for HUD subsidies.

Get Quotes ← Apply for a loan in minutes and get multiple quotes today

In this article:
  1. What’s Included in TDC
  2. TDC Limits
  3. Get Financing

Image by PixelAnarchy from Pixabay

When developing any type of commercial real estate project, costs are of the utmost concern. Especially in recent years, with the soaring price of timber, steel, and transportation, many developers have responded by closely scrutinizing all expenses involved in a project.

This is especially true of affordable housing developers — and not just because costs have drastically escalated there, too. Projects taking advantage of the Department of Housing and Urban Development’s Low-Income Housing Tax Credits, or LIHTC, must calculate a project’s Total Development Cost — a specifically defined term — to understand the level of subsidy a development will receive.

Depending on which type of LIHTC a project is utilizing, the subsidy covers a different portion of a project’s Total Development Cost, or TDC. A 4% LIHTC subsidizes 30% of all costs, while a 9% LIHTC covers a significantly higher 70%.

What’s Included in TDC

It can often be more complicated to figure out an affordable housing project’s Total Development Cost than one might expect. Naturally, the costs of materials and labor are included, but the list is actually quite extensive. All of the items below are typically considered part of a project’s TDC:

  • Construction (both labor and materials)

  • Site acquisition

  • Administration

  • Planning

  • Financing

  • Equipment

  • Demolition

  • Infrastructure

The infrastructure cost aspect even include work done off-site. For example, if you must invest in sewage improvements which will be conducted a block away from your building site, those costs are still included in TDC.

TDC Limits

HUD sets limits on what Total Development Costs should be, on a per-unit basis. Developments are required to adhere to these limits, which are set based on a project’s location, to regulate the amount of public housing funds that may be used to subsidize any LIHTC developments.

Developers exceeding these limits may apply for a waiver. This typically requires the developer to justify any higher-than-expected costs, and approval is generally determined on a case-by-case basis. Enforcement of this requirement does change from time to time: For example, HUD waived the TDC waiver requirement for projects exceeding TDC by up to 25% without a waiver through the end of 2021.

Should a project exceed TDC without a waiver, this essentially means the development is not classified as affordable housing and will not benefit from those respective subsidies.

In this article:
  1. What’s Included in TDC
  2. TDC Limits
  3. Get Financing

Getting commercial property financing should be easy.⁠ Now it is.

Click below for a free, no obligation quote and to learn more about your loan options.

Get financing →
Janover logo

HUD Loans is a Janover company. Please visit some of our family of sites at: Multifamily Loans, Multifamily Today, Commercial Real Estate Loans, SBA7a Loans, CMBS Loans, Apartment Loans, HUD Loans, HUD 221d4 Loan, HUD 232 Loan, HUD 223f Loan, HUD 223a7 Loan, SBA Express Loans, SBA 504 Loans, and OpportunityZones Help.

Janover Inc.

6401 Congress Ave
Ste 250
Boca Raton FL 33487

hello@hud.loans

Site Information

Privacy Policy
Terms of Use

This website is owned by a private company that offers business advice, information and other services related to multifamily, commercial real estate, and business financing. We have no affiliation with any government agency and are not a lender. We are a technology company that uses software and experience to bring lenders and borrowers together. By using this website, you agree to our use of cookies, our Terms of Use and our Privacy Policy. We use cookies to provide you with a great experience and to help our website run effectively.

Freddie Mac® and Optigo® are registered trademarks of Freddie Mac. Fannie Mae® is a registered trademark of Fannie Mae. We are not affiliated with the Department of Housing and Urban Development (HUD), Federal Housing Administration (FHA), Freddie Mac or Fannie Mae.

Copyright © 2022 Janover Inc. All rights reserved.