Program election (9% vs. 4% vs. hybrid) — Pennsylvania

One Allocation Plan, two federal tracks — and PA's 4% program is not fully as-of-right

The 2025/2026 Qualified Allocation Plan ("Final Plan as Adopted by the Board of the Pennsylvania Housing Finance Agency October 10, 2024") is the currently governing document — confirmed directly against PHFA's own website, which lists no 2027 or later QAP and identifies the 2025/2026 plan as current. It covers two program years, 2025 and 2026, under a single document, and states plainly that "the Agency administers two separate and distinct tax credit programs: the 9% program and the 4% program" (Section 1.5).

What the summary table doesn't show is that PA's 4% program is not simply "as-of-right subject to underwriting" the way it is in Kansas or (for the credit itself) Texas. Section 2.7 states directly: "To qualify for 4% Tax Credits with Tax-Exempt Bonds, the Agency requires that the Application meet the Threshold Criteria for both the 9% and the 4% Tax Credit Programs (see Section 3) and score at least 110 points under the Selection Criteria (see Section 4) for new construction and/or rehab developments and 110 points for preservation developments." A 4% deal isn't ranked against other 4% applicants for a fixed pool of dollars — volume cap is processed on a rolling, first-come basis until it runs out — but every single 4% Application still has to clear the identical point scale PHFA uses to rank the 9% round. That puts PA's 4% program structurally between Georgia's genuinely ranked 4%/Bonds competition and Texas's or Kansas's un-scored priority-tier/lottery queues: PA scores every 4% deal, but only as a pass/fail gate, not a ranking.

The federal bond test: PHFA's own newer policy has already answered OBBBA, but the QAP's own text hasn't caught up

The QAP's 9%-vs-4% comparison table asks "Does the project need to meet the 50% Bond Test" and answers "Yes" for the 4% program (Section 1.5), and the Agency's own Volume Cap program guideline (2025 MPG-08) still states: "Developments receiving tax exempt financing for at least 50 percent of the aggregate basis of the property including land are not required to submit an application for 9% Tax Credits." Neither document has been rewritten to reflect the One Big Beautiful Bill Act (H.R. 1, signed July 4, 2025), which lowered the federal aggregate-basis bond-financing floor to 25% (for bonds issued after Dec. 31, 2025, alongside at least 5% of aggregate basis financed by those newer bonds).

PHFA answered the federal change in a separate document, not a QAP amendment: a "Revised Bond Test Policy" memo dated March 19, 2026, which states the reasoning directly — "Due to the increased demand in the multifamily volume cap program, lowering the bond test threshold will help spread the limited resource of tax-exempt volume cap to more developments across the Commonwealth of Pennsylvania and hence create and/or preserve more affordable units." The operative rule, quoted directly from the memo: "Tax-Exempt Volume cap should not exceed the greater of 25% - 35% of the project's aggregate eligible basis or the amount of maximum permanent supportable debt." For deals where permanent supportable debt would exceed 35%, "the developer must work with the Agency to determine if Agency tax-exempt and taxable products can help reduce the amount of volume cap needed and/or if there is another mechanism to reduce the amount of volume cap needed." A separate construction-cost gate applies to preservation/rehab/conversion deals specifically: they must show construction costs of at least 30% of replacement value to qualify for any volume cap at all, and if construction costs are 40% or less of replacement value, volume cap is capped at only 30% of aggregate eligible basis regardless of the 25%-35% range otherwise available.

The memo also sets a real transition deadline: "Unclosed projects that had Board approval at or above the 50% bond test prior to December 31, 2025 and/or projects where the full application was submitted to the Agency prior to December 31, 2025 must close by July 31, 2026 in order to have a bond test that exceeds 50%." Miss that closing date and a deal that was underwritten to the old 50%-plus structure falls back into the new 25%-35% regime. Note the direction of PHFA's move here is the opposite of Colorado's and Georgia's: both of those states imposed a tighter administrative ceiling than the new 25% federal floor (30% in both cases) specifically to prevent gaming the lower number. PHFA instead moved toward the federal floor — and its own stated reason is to spread scarce volume cap across more deals, not to restrict it.

PA's real "hybrid": one project, two credit rates, split by the aggregate-basis line — not a named application category

Nothing in PHFA's QAP, underwriting guidelines, or RFP documents uses "hybrid" as a term of art the way Colorado's QAP does with its distinct "9% Housing Tax Credit Paired with 4% Housing Tax Credit" applicant category. What PA has instead is a mechanical consequence of the aggregate-basis test itself, spelled out in the Agency's Volume Cap guideline (2025 MPG-08): "Developments receiving tax exempt financing on less than 50 percent of the aggregate basis will be eligible for 30% present value Tax Credits on only that portion of the eligible basis financed by the tax exempt bonds. For the remaining portion, the applicant must apply and compete for an allocation of Tax Credits from the Agency for the 70 percent present value Tax Credit." (That guideline has not been updated for the March 2026 bond-test policy either — read "50 percent" here as a stale reference to the same superseded threshold discussed above, with the new 25%-35% range substituting for it in practice.)

In plain terms: a single Pennsylvania development can carry a 4% award on the slice of its eligible basis actually financed by tax-exempt bonds, and a separately-won, competitively-ranked 9% award on the remainder — the same project, two different present-value rates, allocated on two different tracks, with the 9% portion subject to the full competitive round rather than any priority or set-aside for previously-bonded deals. This is PA's structural equivalent of a "hybrid" — a basis split, not a discrete application type — and a developer weighing 9% vs. 4% vs. hybrid in Pennsylvania is really deciding how much of the deal's basis to push through bonds versus how much to expose to the competitive 9% round's own scoring risk.

PHTC to AHTC: Pennsylvania's own state credit was repealed and rebuilt mid-cycle

Pennsylvania does have its own state housing tax credit, and it changed fundamentally five weeks after the QAP's most recent language about it was written. The QAP itself (adopted Oct. 10, 2024) still describes the older program: "This Allocation Plan meets the requirements outlined in Section 1909-G of Article XIX-G of the Pennsylvania Code which establishes the Pennsylvania Housing Tax Credit" — the PHTC, created by Act 107 of 2020, $10 million a year, administered by PHFA "using the same guidelines, procedures and priorities used to administer the Tax Credit Program" wherever possible. Under that structure, PHFA conditionally reserved PHTC dollars directly to a specific applicant's project alongside its federal 9% or 4% award; the applicant's own investor (or a separate PHTC investor) then purchased the credit. PHFA's own program guidelines, updated Jan. 13, 2025, capped that per-project award at $1,500,000.

Act 45 of 2025 — approved by Governor Josh Shapiro on Nov. 12, 2025 (P.L. 156, No. 45) — repealed Article XIX-G outright and enacted a new Article XVI-W.1 in its place, renaming the program the Affordable Housing Tax Credit (AHTC). The statute's own continuation clause is explicit that this is a replacement, not a new program layered on top: "The addition of Article XVI-W.1 is a continuation of Article XIX-G... Except as otherwise provided in Article XVI-W.1, all activities, including tax credits, initiated under Article XIX-G... shall continue and remain in full force and effect and may be completed under Article XVI-W.1." The annual cap is unchanged by statute — Section 1607-W.1(a): "the agency may allocate an amount not to exceed $10,000,000 in each fiscal year in tax credits" — but the mechanism around it changed completely.

The net effect for program election: under the old PHTC, a developer's decision to also pursue the state credit was folded into the same LIHTC application — one Tab 43 submission, one conditional reservation, tied to the same 9% or 4% election. Under the AHTC, the credit itself is sold at a PHFA-run sale to whichever taxpayer bids or negotiates best terms, with no obligation that the buyer have any relationship to a specific development; a developer instead separately applies to PHFA for AHTC Loan or Grant funding drawn from the resulting cash Fund, still gated on already holding (or being eligible for) a 9% or 4% federal award, but no longer as a single joint credit-and-project package. PHFA has run at least one sale under the new structure — a public announcement (PR Newswire) describes PHFA "accepting bids to purchase $10M in Affordable Housing Tax Credits" for construction/rehabilitation of affordable rental communities — but this research found conflicting secondary reports on that round's exact bid deadline (one report states July 21, 2026; another summary states Aug. 28, 2026), and could not resolve the discrepancy against a document read directly from PHFA. Confirm the live round's actual deadline directly with PHFA rather than relying on either secondary figure.

Two things about the AHTC Loan/Grant terms are worth carrying forward into underwriting: PHFA's March 2026 draft guidelines describe the AHTC Loan as "non-amortizing, zero percent interest," a 40-year term with a 35-year affordability period, secured by a mortgage; the AHTC Grant carries the same 35-year affordability period without debt. Both are explicitly capped at $1,000,000 "per qualified low-income housing project" as separate instruments — this research could not confirm from the draft guidelines whether a single project could stack both an AHTC Loan and an AHTC Grant (i.e., up to $2,000,000 combined) or whether PHFA treats them as mutually exclusive per project; that ambiguity sits inside a document PHFA itself has not yet finalized.

PHARE and PHFA's other soft resources: a parallel funding stack, not a program election

The Pennsylvania Housing Affordability and Rehabilitation Enhancement (PHARE) fund appears throughout PHFA's Tax Credit materials as one of several optional Agency resources a Tax Credit applicant may separately pursue — the QAP lists "Tax-Exempt bonds, Agency first mortgage financing..., PennHOMES, PHARE, HTF, the Pennsylvania Housing Tax Credit and other programs" together as financing an applicant can layer onto a Tax Credit award (Section 2.15), and PHARE participation (paired with PennHOMES or HTF) is referenced in exactly one competitive scoring category — the Build America Buy America criterion worth up to 5 points (Selection Criteria C.4). Nothing in the QAP makes PHARE a precondition for, or a consequence of, choosing 9% over 4% (or vice versa): it is a parallel soft-funding-stack decision a developer makes independently of the federal credit-program election, unlike the tighter dependency some other states build between their state credit and a specific federal track.

Philadelphia: folded into PHFA's one statewide process, not a separate allocating agency

This research found no statute, QAP provision, or PHFA guideline establishing Philadelphia (or any other Pennsylvania municipality) as its own federal credit-allocating agency the way IRC Section 42(h)(3)(D) lets a "constitutional home rule city" like New York City or Chicago run a genuinely separate allocation process with its own ceiling and its own QAP. PHFA's Volume Cap guideline (2025 MPG-08) instead frames issuer choice as a financing-structure decision layered on top of the single statewide credit process: "Applicants are encouraged to use the Agency as Bond Issuer, but Applications using a local issuer will also be considered. The issuing authority must also determine the amount of Tax Credits required to assure the feasibility and long term viability of the development (the 42(m) review)." A Philadelphia-sited deal can use the Philadelphia Housing Authority, the Philadelphia Authority for Industrial Development, or the Philadelphia Redevelopment Authority as the bond issuer of record, but the federal 9% or 4% credit determination itself — and the required Section 42(m) review — still runs through PHFA's own single Allocation Plan; there is no separate Philadelphia ceiling, pool, or competing QAP to check apportionment against.

One reported example illustrates how that issuer flexibility actually plays out, though this research could not independently confirm it against a PHFA-published document: trade press (Affordable Housing Finance) describes PHFA making a direct volume-cap allocation to the Philadelphia Housing Authority as bond issuer for a 327-unit Phase I development that closed in December 2025, reportedly PHFA's first such direct allocation to a housing authority. Treat that as a reported, secondary-sourced data point on how local issuers participate inside PHFA's process — not as evidence of a separate Philadelphia allocating authority, which this research did not find.