In Conversation with Allocators
The session was moderated by Jim Tassos, Deputy Director of Tax Policy and Strategic Initiatives at NCSHA. Speakers were Ruby Dhillon, Director of the Arizona Department of Housing; Kathryn Grosscup, Manager of Housing Tax Credit at the Colorado Housing and Finance Authority; and Claudia O'Grady, Vice President of Multifamily Finance at the Utah Housing Corporation.The panel covered implementation of the 25% bond test, development costs, equity pricing, state credit programs, supportive housing, and developer capacity.
State Overviews and Political Context
Each panelist opened with a snapshot of their state's political environment and program conditions.
Arizona operates under a divided government, with a Republican-controlled legislature and a Democratic governor, making legislative progress difficult. The LIHTC program nonetheless has been the primary driver of unit production, with more than 10,000 units created over the last three years through combined 9% and 4% activity.
The state recently moved to a lottery system for 4% deals as volume cap became fully oversubscribed, and its most recent 9% competitive round drew 37 applications, including developers new to the state, for approximately 12 available awards.
Colorado faces a documented housing deficit of 106,000 units across all income levels, and housing policy is now front and center in state politics in a way the panelist described as unprecedented. The Colorado Housing and Finance Authority operates independently from state government and does not rely on state appropriations, providing insulation from budget pressures while the state works through a challenging fiscal year. Demand for tax credit resources has never been higher, and the agency is running its largest 9% round in its history.
Utah is a solidly Republican state with a governor who has made delivery of 35,000 new single-family starter homes a central policy commitment. That focus has shifted resources and political attention toward single-family housing and away from multifamily, and has also produced a reduced appetite for permanent supportive housing serving populations with criminal histories or substance use issues.
The state faces a meaningful housing shortage and continues to prioritize new production over preservation, while also watching closely as the potential closure of the Federal Financing Bank threatens its risk-sharing program, which has delivered permanent financing as much as 100 basis points below market rate.
Implementing the 25% Bond Test
The reduction of the private activity bond financing threshold from 50% to 25% has created a surge of interest in 4% bond deals across all three states, but each has taken a different approach to implementation.
Arizona adopted a hybrid standard, using either a 30% test or the maximum supported primary debt, whichever is greater, following guidance developed by Tiber Hudson. Applications coming in are ranging between 28% and 32%, with nonprofits in particular relying on the buffer above 25%.
The state noted a first-ever twinning deal, a 9%/4% combination that would not have been financially feasible at the 25% floor.
Colorado created a dedicated fund with a $125 million cap using an open-door model, structured around 30% aggregate basis per mortgage, though with state credit layered in the agency can accommodate deals up to 45% where necessary.
Colorado also reported robust bond recycling activity, recapturing approximately $100 million in volume cap in the first quarter alone and redeploying nearly $70 million of that into deals within the same window.
Utah is building out its recycling infrastructure with the help of bond counsel, using a 30% ceiling and working to have a pipeline ready to absorb recycled bonds within the required six-month redeployment window.
The state acknowledged recycling is complicated to execute and flagged a related concern: a growing wave of less experienced developers is submitting 4% applications, and tying up oversubscribed volume cap for 18 months with applicants who cannot close is a significant risk. Utah is implementing experience requirements for 4% deals as a result, despite some pushback from emerging developers.
Arizona is in the early stages of developing a recycling program. Panelists noted that the window for bond recycling activity is likely two to three years before the pipeline of eligible deals thins out, making the current period an important one for states to build up that capacity.
Development Costs and Cost Control
Rising development costs are straining feasibility across all three states. A national NCSHA survey cited by the moderator found that states are pursuing cost control along four main tracks: reviewing energy and environmental criteria, adjusting QAP and construction standards, reassessing development cost limits, and streamlining program processing. The last of these was cited by nearly every state as a priority, on the logic that delays directly increase costs.
Colorado has launched Housing Hub Colorado, a collaboration among CHFA, the Department of Local Affairs, the Office of Economic Development and International Trade, and the City and County of Denver, aimed at aligning application timelines, reducing duplicative documentation requirements across agencies, and eventually building a common document portal.
The agency counted over 2,000 de-duplicated questions across four agencies as a baseline metric for what the collaboration is trying to reduce. Colorado also maintains a publicly available development cost dashboard, updated every six months, that breaks down costs by region, property type, and capital stack component.
Utah has been scrutinizing high-cost applications and rejecting excessive amenities. The panel cited a recent downtown Salt Lake City project coming in at $750,000 to $800,000 per unit as an example of the kinds of numbers that are increasingly difficult to defend, even with broad public support and multiple subsidy sources.
The state is also exploring alternative construction methods, including modular, though no modular multifamily project has successfully been produced in Utah to date. An energy summit is planned for September to build consensus around cost-effective alternatives to some of the existing certification programs.
Equity Pricing and State Credits
Equity pricing is holding in high-demand urban markets but declining in rural areas and on deals with weaker sponsor profiles. Utah reported pricing in the high 90-cent range in Salt Lake City and mid-80s in rural communities.
Arizona saw a range from 80 to 97 cents, with tribal land and rural deals at the lower end. Colorado noted that 9% credit pricing has been soft, though state credit pricing has remained strong.
State credits have become a critical gap-filling tool, and the divergence among the three states on this front is significant. Arizona's state credit program, which had supported over 1,000 units through both 9% and 4% deals, was sunset by the legislature in December. Advocacy is underway to restore it, and the governor's Housing Acceleration Fund, seeded with $500,000 in state funds, is intended as a partial bridge.
Colorado's state credit program was renewed in 2014, expanded in 2024, now encompasses multiple credit types including a transit-zone credit advancing in the current legislative session, and is committed through 2031.
Utah's state credit pairs primarily with 4% deals and has been essential to making projects pencil in rural communities where they otherwise would not have been feasible, though it is set to sunset in two years and is the subject of an active education and advocacy campaign.
Supportive Housing and Developer Capacity
All three states described supportive housing as a continuing priority facing increasing resource constraints. Common underwriting requirements include experienced service providers, long-term rent subsidies, and adequate reserves.
Colorado described a long-standing technical assistance program in which a state-funded technical assistance provider works with development teams to build both a real estate model and a services model before a project moves to credit application.
Utah requires subsidies for a minimum 15-year compliance period and has encouraged Medicaid waiver arrangements where service providers qualify. Arizona has worked with health plans, including Blue Cross Blue Shield of Arizona, to provide capital support in supportive housing deals, and has incentivized developers who complete the Corporation for Supportive Housing's academy when they come through the 9% competitive round.
Panelists also flagged a growing volume of applications targeting residents with intellectual or developmental disabilities, a population that presents new underwriting and fair housing questions for which best practices are still being developed.
The session closed with a discussion of developer capacity evaluation. AHIC noted it is revisiting its liquidity and net worth requirements, which have not kept pace with current deal complexity, and is developing a framework that incorporates contingent liabilities rather than relying solely on prescriptive thresholds.
All three states acknowledged this as an area where additional NCSHA guidance on recommended practices for evaluating sponsor capacity would be welcome.