Two Sets of Requirements on One Project
A typical affordable or insured multifamily deal layers several capital sources: a construction lender, an agency loan or a loan insured by HUD, tax credit equity and sometimes state or local soft funds. Each source can attach its own insurance and completion requirements, and the strictest term on each line usually controls the program. Developers and general contractors who map those requirements before the construction contract is signed are less likely to rebuy coverage or rework bonds at closing.
How private lender exhibits work is explained in construction loan insurance requirements.
HUD-Insured Construction
HUD's Section 221(d)(4) program insures loans for new construction and substantial rehabilitation. Its MAP Guide, in the March 2021 revision read for this page, calls for payment and performance bonds of 100 percent each or a cash or letter of credit alternative that varies by building type, and the program brings Davis-Bacon wage rules, staged retainage and independent cost certification. HUD's builders risk form requires completed value coverage with a mortgagee clause.
The HUD terms are set out in HUD 221(d)(4) construction bond and insurance requirements.
State Housing Finance Agencies
State agencies write their own terms. In California, CalHFA publishes insurance requirements for builders risk, general contractor liability, auto and professional liability, HCD's regulations name the department as loss payee or additional insured and CTCAC caps builder overhead, profit and general requirements. In Texas, TDHCA's rules and closing checklist set bonds, retainage, insurance and contractor fee limits. In Nevada, the Housing Division's allocation plan and regulations set the contractor fee cap, licensing timing and cost certification.
- California: CalHFA, HCD and CTCAC
- Texas: Texas Department of Housing and Community Affairs
- Nevada: Nevada Housing Division
The California terms are set out in CalHFA, HCD and CTCAC construction requirements.
Builders Risk and Liability Terms Agencies Ask For
Agencies commonly ask for builders risk written on a completed value basis, the agency named as loss payee or mortgagee and liability coverage that names the agency as additional insured, often with a completed operations period after the project is finished. Limits and deductible ceilings vary by agency, and a general contractor's annual program may not meet them without endorsements or a project-specific placement.
Property terms for these projects are explained under multifamily builders risk.
Bonds and Completion Assurance
Completion assurance takes several forms: payment and performance bonds, letters of credit, cash escrows and completion guaranties from the developer. Which form an agency accepts, and in what amount, depends on the program and sometimes on the agency's lien position. Bonding capacity is the surety's decision, so a general contractor taking on an agency-financed project usually confirms capacity before the bid.
How the bond itself works is explained under performance bonds.
Prevailing Wage, Contractor Fees and Cost Certification
Federal funds can bring Davis-Bacon wage requirements, and some state programs apply state prevailing wage. Tax credit rules in California and Nevada cap the builder's or contractor's fee at 14 percent, Texas sets tiered contractor fee limits and most programs require a CPA cost certification at completion. Those rules affect the general contractor's pricing and documentation as much as its insurance.
The Texas rules are set out in TDHCA construction bond and insurance requirements.
Building One Program for an Agency-Financed Project
For a developer, the practical step is a compliance matrix that lists every capital source's insurance, bond, wage and fee terms side by side, then a single insurance and surety plan that meets the strictest term on each line. That matrix also becomes the checklist for certificates and bond forms at closing. Multi-building or phased affordable projects sometimes use a wrap-up to control liability limits and completed operations across contractors, subject to the lenders' and agencies' approval.
How a wrap-up fits multifamily work is explained under residential wrap-up programs.
Before You Ask for a Quote
What to Gather
- Every lender's and agency's insurance exhibit or requirements document
- The current year's allocation plan and program rules
- The construction contract and the general contractor's current program
- Bond forms or completion assurance requirements from each source
- Prevailing wage determinations, if any
What to Ask the Insurer or Surety
- Which source sets the highest limit on each line?
- Does the agency require bonds, a letter of credit or a completion guaranty?
- Does the contractor fee cap change how insurance costs are budgeted?
- Who must be named as loss payee, mortgagee or additional insured?
Quick Answer
HUD and state housing finance agencies typically require completed value builders risk with the agency as loss payee or mortgagee, liability coverage naming the agency as additional insured, completion assurance such as payment and performance bonds, retainage and, under tax credit rules, caps on the general contractor's fee.
Common Mistake
Building the insurance program to the construction lender's exhibit alone. The agency financing or allocating to the project can set higher limits or different named-insured wording.
Broker Perspective
We put every capital source's requirements in one matrix first, because the strictest term on each line usually decides the program.
Coverage Impact
Agency documents set minimums and wording; the policies, endorsements and bonds issued decide what responds, subject to underwriting and the surety.
Questions Buyers Ask
Does HUD 221(d)(4) require payment and performance bonds?
HUD's MAP Guide in its March 2021 revision calls for payment and performance bonds of 100 percent each, with a cash or letter of credit alternative that varies by building type.
What liability limits does CalHFA require of the general contractor?
CalHFA's insurance requirements dated March 28, 2024, call for $2 million per occurrence and $4 million aggregate, with CalHFA as additional insured.
Do tax credit rules limit the general contractor's fee?
Yes. California's CTCAC regulations and Nevada's allocation plan cap builder or contractor overhead, profit and general requirements at 14 percent, and Texas sets tiered limits.
Are agency requirements the same every year?
No. Allocation plans and program rules are updated regularly, so the current year's documents are confirmed before a budget or insurance program is set.
Official Sources
- HUD Multifamily Accelerated Processing Guide (Revision March 19, 2021), U.S. Department of Housing and Urban Development. Payment and performance bonds of 100 percent each or a cash or letter of credit alternative for Section 221(d)(4) construction; Davis-Bacon, retainage and cost certification. Verified 2026-10-26.
- Form HUD-92447, Property Insurance Requirements (07/2005), U.S. Department of Housing and Urban Development. Builders risk on a completed value form at 100 percent of insurable value with a mortgagee clause. Verified 2026-10-26.
- CalHFA Insurance Requirements (March 28, 2024), California Housing Finance Agency. Completed value builders risk and general contractor liability of $2,000,000 per occurrence and $4,000,000 aggregate with CalHFA as additional insured. Verified 2026-10-26.
- CTCAC Regulations (December 11, 2024), California Tax Credit Allocation Committee. Builder overhead, profit and general requirements capped at 14 percent. Verified 2026-10-26.
- Nevada Housing Division 2026 Qualified Allocation Plan (amended March 25, 2026), Nevada Housing Division. Contractor fee capped at 14 percent, Nevada licensing for the general contractor and CPA cost certification. Verified 2026-10-26.
Reviewed by the Principal, Gleason Insurance Brokers, LLCUpdated
