Site sourcing and screening — Puerto Rico

Confirm which QAP governs, and how federal law actually makes Puerto Rico a full LIHTC jurisdiction

The document that governs the current cycle is PRHFA's 2025 Qualified Allocation Plan, filed with Puerto Rico's Department of State as Number 9712 and dated October 24, 2025 -- the version that incorporated public comments on an August 2025 draft (PRHFA published a formal response to those comments, "PRHFA Agree Draft of QAP-2025 Public Comments Review Comment not accepted," alongside the final document). As of this research, a fresh download of the file PRHFA itself serves at afv.pr.gov (wp-content/uploads/2025/10/qap25.pdf) is byte-identical to the copy used for this build-out, and PRHFA's public notices page (afv.pr.gov/avisos) lists only NOFA-2025 closing-date extensions (January and February 2026) since approval -- no QAP amendment notice. That is the same failure mode this library has flagged in other states (a QAP amended mid-cycle without a name change): it was checked directly here and not found, but a screen built later in the 2025-2026 cycle should re-check afv.pr.gov before relying on this document, since PRHFA amends its permitting-adjacent statutes on a roughly annual cadence and could do the same to a QAP.

Puerto Rico is a U.S. territory, not a state, but federal law puts it on equal footing for LIHTC purposes through a specific, narrow provision: 26 U.S.C. § 42(h)(8)(B), which states in full -- "Possessions treated as States. The term 'State' includes a possession of the United States." That is the actual mechanic, confirmed directly against the statutory text rather than assumed. It is easy to reach instead for § 42(h)(4), and that citation shows up in some secondary sources describing territory treatment -- but § 42(h)(4) is a different provision entirely: it exempts the portion of credit attributable to eligible basis financed by tax-exempt bonds (26 U.S.C. § 103, taken into account under § 146) from the state housing credit ceiling in § 42(h)(1), i.e., the rule that makes most 4% bond-financed deals uncapped. PRHFA's own QAP cites § 42(h)(4) correctly in that narrower bond-financing context (Section 4.2.3, discussed below); the provision that actually extends full LIHTC jurisdiction status to Puerto Rico is § 42(h)(8)(B). The state housing credit ceiling itself is population-based (§ 42(h)(3)(C), with population determined per § 42(h)(3)(G) by reference to § 146(j)), and IRS guidance confirms Puerto Rico's resident population is used on the same basis as the fifty states and DC for that calculation.

Two structural facts belong at the screening stage because they cap what any site can become: the 2025-QAP limits every project to no more than one hundred and twenty-five (125) units for this allocation cycle (Section 4.1), stated as deliberate policy to spread awards across more municipalities rather than concentrate them in a few large developments; and every application needs a minimum of 30 of the 100 available Point Ranking System points just to be eligible for a reservation or allocation at all (Section 5.4.1), regardless of relative ranking against other applicants that cycle.

The 30% basis boost is two different mechanisms sharing one number

Screening for basis-boost eligibility means checking two separate things, not one. The first is the ordinary federal mechanism: HUD designates Qualified Census Tracts (50%+ of households below 60% of area median gross income, or a 25%+ poverty rate) and Difficult Development Areas (high construction/land/utility cost relative to area median income) annually for every U.S. jurisdiction including Puerto Rico, under 26 U.S.C. § 42(d)(5)(B)(ii)-(iii), publishing the results each September in the Federal Register and at huduser.gov/portal/datasets/qct.html. PRHFA reproduces the applicable list as Annex D of the QAP.

The second is a PRHFA policy choice layered on top, and the QAP states it plainly: "any project located within an urban area (as defined under the selection criteria), or any portion thereof, that is not contained by or designated as a Qualified Census Tract (QCT) shall be treated as located in a Difficult Development Area (DDA)" (Section 4.2.1). That sentence is PRHFA exercising the state housing credit agency's own discretionary authority under 26 U.S.C. § 42(d)(5)(B)(v) -- the provision letting a state agency designate any building as needing the 30% increase for financial feasibility -- applied as a blanket policy to an entire class of sites (urban, non-QCT) rather than case by case. Outside a QCT, DDA, or an urban area, PRHFA still retains discretion during underwriting to grant the boost to any project it determines needs it to be financially feasible (Section 4.2.2).

Two carve-outs matter at screening. The 30% boost never applies to the acquisition costs of existing buildings or related acquisition fees, under either mechanism. And PRHFA's own discretionary urban-area policy (Section 4.2.1-4.2.2) does not extend to tax-exempt-bond-financed (4% LIHTC) projects not subject to the annual Tax Credit Volume Cap -- for those, rehabilitation costs qualify for the 30% boost only if the site is actually inside a designated QCT or DDA (Section 4.2.3), which tracks the last sentence of § 42(d)(5)(B)(v) itself: the state-designation option does not apply to any building where § 42(h)(1) is disapplied by reason of § 42(h)(4) -- the bond-financing exception described above.

Puerto Rico's economic conditions are relevant background for why urban sites so often clear the federal QCT threshold on their own: 2024 American Community Survey data puts the Commonwealth's poverty rate at 37.3%, against 12.1% nationally, with a median household income of roughly $27,213 against $81,604 nationally. That gap plausibly means a large share of urban census tracts independently qualify as QCTs under the 50%-below-60%-AMI or 25%-poverty tests -- but this research did not pull HUD's actual 2025 QCT tract list for Puerto Rico to confirm an exact share, and a specific site's QCT/DDA status should be checked directly against Annex D or HUD's own qct_data spreadsheet rather than inferred from island-wide statistics.

Hazard geography is PRHFA's own scored, hex-grid data -- not generic disaster boilerplate

The QAP's Housing Needs Assessment (Section 3.2) is built directly from Puerto Rico's Disaster Recovery Action Plan, developed in response to Hurricanes Irma and Maria. HUD allocated $8.285 billion in CDBG-MIT (mitigation) funds to Puerto Rico under Federal Register Notice 85 FR 4676 -- the largest CDBG-MIT allocation of the eighteen HUD grantees that received one -- and PRHFA cross-referenced Census rental-unit counts against the Action Plan's own hex-grid hazard mapping (its Figure 12, 100-Year Flood Zone Hazard Areas, and Figure 17, Rain-Induced Landslide Susceptibility Areas) to quantify exposure at both the island-wide and municipality level.

PRHFA's LIHTC-MIT program layers roughly $83.8 million of CDBG-MIT project-development funding on top of ordinary Tax Credits (per a June 6, 2025 Subrecipient Agreement between PRDOH and PRHFA setting aside $100 million in CDBG-MIT funds, of which $83.8 million is designated for project development costs), specifically to fund (1) rehabilitation of existing structures to modern, more resilient building standards, and (2) new construction using strategic site selection that avoids localized flood/landslide risk.

This hazard framing is not background color -- it is directly scored under the QAP's Project Location category (Section 5.4.2, Criterion I). A project earns 3 of the category's points for being located outside an area where "the geography presents localized risks," or for rehabilitating an existing structure into rental housing specifically to mitigate natural-disaster impacts if it is inside such an area (I.1.4, verified against PRHFA's own Hazard and Risk Dashboard); another 3 points for being located in one of the municipalities identified in the Disaster Recovery Action Plan as having the lowest proportion of rental units outside the highest-risk areas (I.1.5); and another 3 points specifically for sites in a municipality that FEMA's Disaster Recovery Declaration-4473 designated eligible for Public Assistance following the 2019-2020 earthquakes (I.1.6).

Note the QAP's own text does not describe a separate, Puerto Rico-specific seismic building-code requirement beyond this scoring criterion and the general Green Building Standard / accessibility requirements applied to every project; a site's actual structural seismic-design obligations run through Puerto Rico's building code as administered through the permitting process (Phase 3), not through anything specific to the LIHTC QAP itself. That absence was checked directly in the QAP text rather than assumed.

A 25-point location table keyed to Planning Board maps and surveyor-certified distances, not open GIS

Criterion I (Project Location) is worth up to 25 points, split between a 17-point Location sub-criterion (I.1, covering urban-area status, poverty rate, transit-zone status, and the hazard items above) and a 6-point general-amenity sub-criterion plus a 2-point targeted-amenity sub-criterion (I.2). A separate, uncapped-at-25 deduction (I.3) can subtract up to 5 points for undesirable adjacent uses. None of this scoring runs off a queryable GIS layer PRHFA itself hosts -- it runs off specific Planning Board (Junta de Planificación) reference maps reproduced in the QAP's Annex Q (Centros Urbanos, Zonas Históricas, and the Reglamento de la Ordenación de la Infraestructura en el Espacio Público, Reglamento de Planificación Número 22), plus a federal transit-corridor statute (Section 3(e) of Law 74-1965, for the Urban Train zone of influence) and FFIEC 2015 Census poverty-rate data by tract.