What do "hard costs" in LIHTC projects refer to?

Prepare for the Tax Credit Specialist Exam with detailed flashcards and multiple choice questions complete with hints and explanations. Ace your exam successfully!

In the context of Low-Income Housing Tax Credit (LIHTC) projects, "hard costs" specifically refer to tangible expenses directly related to the physical construction or renovation of a property. These costs include expenses such as building materials, labor, and other direct construction-related expenditures. They are considered "hard" because they are clearly measurable and quantifiable, making them essential components in financial budgeting for a construction project.

Understanding this categorization is crucial for accurately assessing the financial needs of a LIHTC project. Tangible expenses form the bulk of the development expenditures and play a significant role in determining project feasibility. Conversely, other costs, such as permits, administrative fees, operational expenses, and marketing costs, while important, are classified differently—usually as soft costs or indirect expenses. Thus, identifying hard costs helps stakeholders focus on the core investment required for the physical realization of housing projects under the LIHTC program.

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