LIHTC

Following hurricanes Irma and María, Puerto Rico faces a greater need for rental housing. The substantial reduction in available housing caused by the destruction of the hurricanes, combined with a wave of displaced residents in need of housing, represents a major obstacle to the Island’s long-term recovery.

Low Income Housing Tax Credits (LIHTC) have been crucial in the construction of thousands of housing units in Puerto Rico. The Puerto Rico Department of Housing launched the CDBG-DR Gap LIHTC Program, with the purpose of promoting the construction and/or rehabilitation of homes for families and/or elderly people, through financing the difference required to be paid for the construction expenses of low-rent housing, which are usually contributed from other public and/or private funding.

The Puerto Rico Housing Financing Authority (PRHFA) has been designated as the managing entity of the Program and, consequently, will administer the CDBG-DR funds assigned to it under the supervision and with the collaboration of the Puerto Rico Department of Housing. The allocated funds for the LIHTC CDBG-DR Gap Program is nine hundred and sixty-three million dollars ($963,000,000).

There are two types of tax credits for the acquisition, rehabilitation, or construction of rental housing for low-income households.

PHASE 1 | 9% Tax Credits

For the implementation of the first phase of the program, the Department of Housing and PRHFA provided economic assistance through CDBG-DR funds to projects that, according to the financing cycle of the 2016 ‘Qualified Allocation Plan’ (QAP), were ready to go with the nine percent (9%) of LIHTC.

PHASE 2 | 4% Tax Credits

In September 2020, the Department of Housing and PRHFA announced a new project cycle for LIHTC under the four percent (4%) in accordance with the financing cycle of the 2020 ‘Qualified Allocation Plan’ (QAP). In this second phase, $1.8 billion of CDBG-DR funds, in conjunction with LIHTC and other types of funding, will be used to maximize the resources to create projects that meet multiple objectives.

PRHFA is currently evaluating the proposals that were submitted for the projects during this second phase of the Program, which closed in November 2020.

The Program was described by HUD as “… the most important resource for developing low-cost housing in the United States and Puerto Rico,” as it will benefit the low to moderate income communities by increasing the number of affordable homes through new projects of construction or rehabilitation, which in turn promotes economic development, provides quality rental housing, and responds directly to the needs for housing; by providing financing to viable construction projects.

The proposed projects take into consideration the use of materials and methods that promote the protection of the environment, in addition, these projects will implement resiliency measures like energy conservation, such as; EnergyStar® equipment, photovoltaic panels, emergency power generators and security windows, among others. The projects will also include the installation of broadband infrastructure, in order to reduce the digital gap in mixed-income communities, thus providing a platform for individuals and families to engage in the digital economy and increase their access to economic opportunities.

The urban location of these projects is predisposed in areas that are within reasonable distance of businesses, medical facilities, pharmacies, post offices, supermarkets, public transport and recreational areas of the municipalities; seeking to benefit the regional economy.

Homes built or rehabilitated under this Program could benefit any resident of Puerto Rico with low to moderate income, by increasing the inventory of affordable and resilient rental homes in the Island. Similarly, legally established developers, individuals or entities that provide rental housing can benefit.