Operating Pro Forma

Operating funding and associated budgets and sources are relevant for all projects that build (develop) new units of housing and for some that lease existing housing units in the private market. If you are creating the units in the project through leasing, the terms of your lease will determine whether the project will require ongoing operating funding for maintenance or other expenses. 

The Operating Pro Forma is the tool used to estimate the expenses of a project during operations. It provides a summary of anticipated ongoing project expenses. The three most critical aspects of evaluating the Operating Pro Forma are:

  1. Is it complete? Does the Pro Forma include all of the costs that the owner/property manager will incur to properly maintain and manage a successful project? 
  2. Is it accurate? What are the underlying assumptions in establishing operating costs, and are they reasonable? The best assumptions are the actual costs of comparable projects.
  3. Is it realistic over time? The operating budget deals with the continuing costs of operating the project over time. Therefore, multi-year projections should be scrutinized carefully, to ensure that escalation factors are prudent, given the nature of the project and expected economic conditions. 

Click on the link to learn more about How to Prepare a Supportive Housing Operating Pro Forma.

Forms of Operating Funding

Operating subsidies supplement the difference between what the tenant can afford to pay and a reasonable rent charged under market conditions. To determine the level of subsidy, first determine fair-market rent (the amount a landlord could charge for that unit on the open market) and then subtract the tenant’s portion (about 30% of a tenant’s income).

Operating subsidies generally take three forms:

  1. Project-based are those that are "attached" to particular housing units.
  2. Tenant-based subsidies attach to an individual or family.
  3. Sponsor-based attaches to a specific housing sponsor, typically a non-profit housing developer or supportive housing provider.


Next: Supportive Services Funding


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