California Housing Agencies: CalHFA, HCD and CTCAC Construction Requirements

Section 2.b of CalHFA's Insurance Requirements for Multifamily Lending and Asset Management, dated March 28, 2024, calls for builder's risk at construction loan closing when CalHFA funds go in during construction. The policy is written on Special Form perils and reaches the structure, materials on and off site and materials in transit. The document states the insurance "shall be provided based on the value of the project at completion," a reporting form needs CalHFA's written approval and the coinsurance penalty must be waived. The borrower and the general contractor carry losses inside the deductible.

CalHFA is named lender's loss payee by endorsement at least as broad as form 438BFU NS, effective at the closing of the acquisition or construction loan, and the insurer waives subrogation against CalHFA. Under section 9, original certificates and endorsements are due before construction loan closing and before construction starts, and coverage stays in force until the final retention payment is released and permanent property insurance is in place. Insurers must be rated A.M. Best A:VII or better (section 1.d).

Flood coverage under section 7.d is the lesser of completed value, the NFIP maximum or the CalHFA loan balance. Under section 7.e, new construction may request an earthquake waiver, and a seismic study may be required to show the probable maximum loss does not exceed 20 percent. How a builder's risk form responds to a given loss depends on its wording and the terms of the policy issued.

Section 5 of the same document sets the general contractor's program, and section 3 sets the borrower's. The general contractor's liability policy must name CalHFA "as both additional insured for ongoing operations during any construction and for completed operations." The borrower's liability and auto policies must be primary, with 30 days' written notice of cancellation to CalHFA. Section 1.d lets contractors be insureds under the borrower's policies, or the borrower files separate certificates for each contractor, which is one point where a wrap-up can change the paperwork.

Section 6 extends requirements to architects, engineers and other licensed professionals, and section 8 caps deductibles. Earthquake and flood deductibles can be no more than 5 percent of values per building. Property managers need a $1,000,000 fidelity bond, which belongs to the operating phase rather than construction.

• General contractor liability: $2,000,000 per occurrence and $4,000,000 aggregate, with products and completed operations for at least 12 months after CalHFA accepts the work
• General contractor auto: $5,000,000 per accident for bodily injury and property damage, with workers' compensation at statutory limits
• Borrower liability: $2,000,000 per occurrence and $4,000,000 aggregate on CG 0001, $1,000,000 auto combined single limit and $1,000,000 employer's liability
• Architects, engineers and other licensed professionals: errors and omissions of $1,000,000 per occurrence and $2,000,000 aggregate, plus the same liability and auto limits
• Deductibles: property no more than $50,000 per occurrence, and liability and auto no more than $50,000

CalHFA's Mixed-Income Program term sheet, last revised in February 2025, states that the "General Contractor must be licensed by the State of California." A general contractor new to CalHFA must show three comparable projects built in the past five years, with resumes of its principals, key staff and on-site supervisor. At application, the applicant must show it has engaged a general contractor or construction services firm, and the budget must rest on that firm's preliminary bid estimates, so the contractor's numbers typically feed the loan sizing early.

No CalHFA document read for this page states a general payment and performance bond rule or a completion guaranty percentage. Bond requirements are set per project in the loan approval. A May 2026 staff report for one Mixed-Income project shows that project-level approach: the budget carries a payment and performance bond line, the contract is a guaranteed maximum price, builder overhead, profit and general requirements sit at 6.3 percent against the 14 percent CTCAC limit, and CalHFA's approval of a third-party plan and cost study is a condition of construction loan closing. That project's report also found earthquake and flood insurance not required for that site, which shows how the section 7 terms can turn on project facts.

HCD's Uniform Multifamily Regulations, 25 CCR sec. 8300 and following, apply across its multifamily lending programs. The text read for this page is the version with an effective date of November 15, 2017. HCD also posts an undated proposed amendment text, and whether those amendments were adopted could not be confirmed, so confirm with HCD that the 2017 text is current.

Section 8303, which addresses scattered-site projects, requires hazard and liability insurance, including flood, for the term of the HCD loan and states that "The Department shall be named as a loss payee or an additional insured on all such policies." HCD receives notice of any lapse or claim. The Multifamily Housing Program standard agreement template for the 2021 round, Exhibit D item 39, repeats that wording for the loan term. The regulations contain no builder's risk or bond section, so those terms come from each deal's loan documents.

Section 8311(c) limits builder overhead, profit and general requirements by 4 CCR sec. 10327, the CTCAC rule below. Section 8311 also sets a cost penalty: a project whose development cost exceeds 170 percent of the limit can draw up to 20 negative points on future HCD funding notices for up to three years, so a general contractor's estimate can carry consequences beyond the current deal.

HCD's Multifamily Housing Program Final Guidelines, dated May 18, 2023, list as an eligible cost "items intended to assure the completion of construction, such as contractor bond premiums," along with construction-period insurance. The same guidelines state that a sponsor's use of program funds is subject to California's prevailing wage law, Labor Code sec. 1720 and following, and HCD requires a compliance certification before it disburses funds. In the 2021 round standard agreement, Exhibit D item 38, that certification is due before the loan closes and must be signed by the general contractor and the sponsor.

HCD also publishes a generic 2024 HOME loan agreement template for cities and counties that receive HOME funds. In that template the city or county is the lender, HCD's own disclaimer says counsel must customize it, and its construction exhibit shows 100 percent performance and payment bonds and a 10 percent retention on hard costs. Those figures belong to that sample document, not to an HCD rule, and a city or county lender can set different terms in its own agreement.

CTCAC's regulations, 4 CCR sec. 10300 and following, in the version dated December 11, 2024, contain no builder's risk limits, liability limits or payment and performance bond requirement. Their effect on the construction program comes through cost. Section 10327(c)(1) sets "an overall cost limitation of fourteen percent (14%) of the cost of construction" for builder overhead, profit and general requirements, "excluding builder's general liability insurance." Prevailing wages count in the cost base, fixed-price contracts that ignore the limit are barred and payments from the builder to the developer must be disclosed.

Section 10327 also raises the threshold basis limits by 20 percent for a development with a legal prevailing wage requirement, and by an additional 5 percent for a project labor agreement under Public Contract Code sec. 2500(b)(1) or a skilled and trained workforce, with contractors and subcontractors complying with Labor Code sec. 1725.5. Under section 10322(i)(2), cost certification is audited by an independent CPA, and a general contractor that is a related party to the developer must be audited to the subcontractor level.

CTCAC prepared further regulation changes for its December 10, 2025, meeting, including amendments to the cost certification section. Whether that package was adopted, and its effective date, is still to be confirmed, so check the current regulations on the State Treasurer's CTCAC pages before relying on the 2024 text.

When CalHFA and HCD both fund a project, each document asks to be named, and the certificates typically show CalHFA as lender's loss payee and additional insured and HCD as loss payee or additional insured, with any other lenders added as their own documents require. The builder fee sits under one 14 percent limit across HCD and CTCAC, while the general contractor's liability premium falls outside it, which can matter when a higher CalHFA auto limit or a longer completed operations term is priced.

A practical step is a single requirements matrix built from the CalHFA exhibit, the HCD regulatory agreement and loan documents and the CTCAC application, checked against the general contractor's current policies and surety capacity before closing. Where a statewide program or a wrap-up is considered, the matrix shows which agency terms each policy has to carry. Coverage terms are subject to underwriting and the terms of the policies and bonds issued, and can vary by carrier guidelines and programs.