The GAO identified wide variation in development costs and several cost drivers for Low-Income Housing Tax Credit (LIHTC) projects completed in 2011–2015. Across 12 selected allocating agencies, median per-unit costs for new construction projects ranged from about $126,000 (Texas) to about $326,000 (California). Within individual allocating agencies, the variation in per-unit cost between the least and most expensive projects ranged from as little as $104,000 per unit (Georgia) to as much as $606,000 per unit (California). After controlling for other characteristics.

The GAO estimates that larger projects (more than 100 units) cost about $85,000 less per unit than smaller projects (fewer than 37 units), consistent with economies of scale. The projects in urban areas cost about $13,000 more per unit than projects in nonurban areas. The projects for senior tenants nearly one-third of all projects—cost about $7,000 less per unit than those for other tenants, potentially due to smaller unit sizes. Allocating agencies use measures such as cost and fee limits to oversee LIHTC development costs, but few agencies have requirements to help guard against misrepresentation of contractor costs (a known fraud risk). LIHTC program policies, while requiring high-level cost certifications from developers, do not directly address this risk because the certifications aggregate costs from multiple contractors. Some allocating agencies require detailed cost certifications from contractors, but many do not. Because the Internal Revenue Service (IRS) does not require such certifications for LIHTC projects, the vulnerability of the LIHTC program to this fraud risk is heightened.