or by the Institute of Puerto Rican Culture (ICP, by its

Spanish acronym) or (b) a copy of the recommendation issued by the ICP as part of the construction permit consultancy process evidencing that the study is not required. Hydraulic/Hydrologic, if the project meets the conditions established under the Puerto Rico Department of Natural and Environmental Resources' (DRNA, by its Spanish acronym) Administrative Order No. 2013-12, or a certification issued by a PE attesting that the study is not required. Phase I environmental site assessment report and/or any other applicable environmental report (updated within one year of the application). Any other report must comply with ASTM E 1527-21 or any updated version as ASTM promulgates, which meets the requirements of EPA's AAI regulations. 5.1.4.16. Comprehensive market study report (updated within one year of the application) performed by a provider unaffiliated with the developer, of the low-income housing needs in the area to be served. The market study should at least include: A statement of the competence of the market study provider, detailing education and experience of primary author and including statement of non-interest. A description of the proposed site and neighborhood, including physical attributes of the site, surrounding land uses, and proximity to community amenities or neighborhood features including shopping, healthcare, schools, and transportation. A map and photos of the subject site and surroundings showing location of community services. An overview of local economic conditions, including employment by sector, list of major employers, labor force employment and unemployment trends over the past 5-10 years. A description of the proposed development, detailing proposed unit mix (number of bedrooms, bathrooms, square footage, proposed rents, AMI level, utility allowances, and any utilities included in rent), proposed unit features and community amenities, and target population including age restrictions and/or special needs populations. Demographic analysis of the number of households in the market area that are part of the target market (i.e., family, senior, etc.), incomeeligible, and can afford to pay the rent, including a projected household base at placed-in-service date. Geographic definition and analysis of the market area, including description of methodology used to define market area and map of market area including proposed site. Analysis of household sizes and types in the market area-including households by tenure, income, and persons per household-and quantifying the pool of eligible tenants in terms of household size, age, income, and other relevant factors. This is important as not all residents of the market area are potential or likely tenants or buyers of a given project. A description of comparable developments in the market area, including any rental concessions these developments presently offer. A description of rent levels and vacancy rates of comparable properties in the market area, segmented by property type (market-rate, Tax Credit, deep subsidy) and with rents adjusted to account for utility differences and concessions or other incentives. Such description should include all existing Tax Credit, CDBG, HOME, and HTF developments in the primary market area, any planned additions to rental stock, including recently approved Tax Credit, CDBG, HOME, and HTF, developments, and certify that the proposed Tax Credit units will not have a negative impact on any existing Tax Credit project in the market area. Expected market absorption of the proposed rental housing, including capture/penetration rate analysis of target populations. The study must evaluate the effective demand and the capture rate, usually expressed as a percentage (the project's units divided by the applicant pool). The capture rate is the percentage of likely eligible and interested households living within a reasonable distance from the project site who will probably need to rent units within the area. Also, the study must provide the expected market absorption rate of the proposed rental housing by the target population. The maximum absorption rate should be 10%. A description of the effect on the market area, including the impact on Tax Credit and other existing affordable rental housing. A statement on how the proposed project would address housing needs experienced as part of the Hurricanes Irma and María, Storm Isaias, Earthquakes of 2019 & 2020, and any other major disaster, as declared by the President of the United States, and how they would benefit the community in the situation of a natural disaster. A statement indicating that the development of new housing units will not have a negative impact on the occupancy and operations of existing rental projects (Tax Credit, HOME, HTF, among others) in the proposed project's municipality and market area. THE AUTHORITY WILL CONSIDER THE MARKET STUDY, THE MARKET, MARKETABILITY FACTORS, AND ANY ADDITIONAL INFORMATION AVAILABLE TO DETERMINE IF AN ACCEPTABLE MARKET EXISTS FOR THE PROPOSED DEVELOPMENT. THE AUTHORITY WILL NOT BE BOUND BY THE CONCLUSIONS OR RECOMMENDATIONS OF THE MARKET REPORT AND RESERVES THE RIGHT TO DISQUALIFY ANY APPLICANT IN THE COMPETITION IF IT DETERMINES THAT AN ACCEPTABLE MARKET DOES NOT EXIST. 5.1.4.17. For rehabilitation and acquisition/rehabilitation projects, a comprehensive Capital Needs Assessment (CNA) report that a competent RA or PE, duly licensed in Puerto Rico, prepares, including an opinion of proposed construction budget. The assessment should examine and analyze, among other things: site; structural systems (roof, bearing walls and columns, foundations); plumbing systems; electrical systems; fire protection systems; building envelope and insulation; interiors (including units and common areas); and mechanical systems. The CNA must be accompanied by a certification from the Accessibility Coordinator (qualified RA or PE duly licensed in Puerto Rico) stating that CNA Report, particularly covered units and project common areas will comply with the structural accessibility mandates of the FHAct and, wherever applicable, the ADA standards and UFAS. 5.1.4.18. Affirmative Fair Housing Marketing Plan (Annex S) completed and signed by an authorized representative. 5.1.4.19. Written tenant selection procedures. 5.1.4.20. Documentation regarding implementation of building standards. As required by Federal Register Vol. 83, No. 28 (February 09, 2018), 83FR5844 and amended by Federal Notice Vol. 84 No. 33 (February 19, 2019), 84FR4836, all new construction of residential buildings and all replacement of substantially damaged residential buildings must comply with a HUDapproved Green Building Standard. PRHFA has extended this requirement to every applicant under this QAP. (see Annex U). Therefore, Applicants that meet criteria for new construction or replacement of substantially damaged buildings are required to obtain a minimum of one of the listed certifications: ENERGY STAR (Certified Homes or Multifamily High-Rise); Enterprise Green Communities; Leadership in Energy and Environmental Design (LEED) (New Construction, Homes, Midrise, Existing Buildings Operations and Maintenance, or Neighborhood Development); ICC-700 National Green Building Standard; Environmental Protection Agency (EPA) Indoor Air Plus (ENERGY STAR a prerequisite); or Any other equivalent comprehensive green building Program acceptable to HUD (such as the Permiso Verde issued by the applicable permits office). The Applicant shall provide the following documentation to demonstrate compliance: Project narrative, plans, and specifications (updated) with the Green Building Standard requirements. Description of the design parameters, strategies, and the implementation process to ensure compliance with the selected Standard(s), including statement of the project's overall green development goals and expected intended outcomes of addressing those goals. Notification of which Green Building Standard(s) is/are being pursued. Certification of Compliance stating that the project complies with the selected Standard(s).⁸ A checklist, or other suitable documentation, which demonstrates adherence to the selected Standard(s). Notification of the person/team in charge of the implementation of the Green Building Standard(s) at the project. For those cases pursuing the Permiso Verde, submit the following: A valid pre-qualification certification from OGPe (Certificado de Pre-Cualificación de Proyecto Verde-OGPe). Notification of the Green Design Guides under Permiso Verde that will be pursued. After registering the Project with the organization or entity in charge of providing the certification of the project from the selected Green Building Standard, evidence of such application or registration. Supporting documentation as deemed necessary or requested by the Authority during the process of the application evaluation and throughout the duration of the project. For rehabilitation of non-substantially damaged structures, Developers shall adhere to the guidelines specified in the HUD Community Planning 8 The Certification of Compliance does not replace the Final Green Building Standard Certification in the case of new construction/replacement of substantially damaged residential buildings. and Development (CPD) Green Building Retrofit Checklist⁹, to the extent applicable, for the rehabilitation work undertaken, including the use of mold resistant products when replacing surfaces such as drywall (see Annex V). When rehabilitation work includes replacing older or obsolete products, the Developer must use ENERGY STAR®-labeled, Water Senselabeled, or Federal Energy Management Program (FEMP)-designated products and appliances. The Applicant shall provide the following documentation to demonstrate compliance: Project narrative, plans and specifications updated with the HUD CPD Green Building Retrofit Checklist requirements. Describe the design parameters, strategies, and the implementation process to ensure compliance with such Checklist. Include statement of the projects overall green development goals and expected intended outcomes of addressing does goals. Certification of Compliance certifying that the project complies with the HUD CPD Green Building Retrofit Checklist. 10 Provide the HUD CPD Green Building Retrofit Checklist with the project's implementation measures. Notification of the Person/Team in charge of the implementation of the HUD CPD Checklist requirements at the Project. Supporting documentation as deemed necessary or requested by the Authority during the process of the application evaluation and throughout the duration of the project. 5.1.4.21. Broadband Infrastructure Requirements, under Federal Register Vol. 83, No. 28 (February 09, 2018), 83 FR 5844. Projects are required to include installation of broadband infrastructure in the project plans and specifications, at the time of new construction or substantial rehabilitation, for multifamily rental housing that is funded or supported by HUD and/or CDBG-MIT funds. PRHFA has extended this requirement to every applicant under this QAP. The project's designer/engineer must certify compliance with this requirement. Projects are excluded from this requirement only if one of the below exclusions can be documented by the project's designer: The location of the new construction or substantial rehabilitation makes installation of broadband infeasible; The cost of installing broadband infrastructure would result in a fundamental alteration in nature of its program, or activity, or in an undue financial burden; or The structure of housing, to be substantially rehabilitated, makes installation of broadband infrastructure infeasible. 9 On February 20, 2020, HUD approved exceptions (waivers) for Puerto Rico to the HUD Community Planning and Development (CPD) Green Building Retrofit Checklist for non-substantially damaged residential buildings funded with CDBG-DR, as requested by PRDOH. The HUD CPD Green Building Retrofit Checklist updated version can be accessed at: https://www.cdbg-dr.pr.gov/en/lihtc/ 10 The Certification of compliance does not replace the final certification of compliance for the rehabilitation of non-substantially damaged structures. Low-Income Housing Tax Credits 2025-Quallfied Allocation Plan The Authority will verify the compliance with the broadband requirements and/or exclusions as part of the Technical Review, which is required as a prerequisite to any reservation and/or award. 5.1.4.22. Accessibility Requirements: Pursuant the VCAs, all Applicants must comply with the following accessibility requirements: Twelve percent (12%) of the total ground floor and/or elevatorserviced units' inventory must be made fully mobility-accessible and scattered under the ADA standards and, wherever applicable, the UFAS and Three percent (3%) of the units' inventory must be made sensoryaccessible and scattered under the ADA standards and, wherever applicable, the UFAS. 5.1.5. Financial and Operational Feasibility The Applicant must demonstrate the financial and operational feasibility of the proposed project through the submittal of: 5.1.5.1. Proposed detail of sources and uses of funds schedule. 5.1.5.2. Schedule of monthly cash flow during construction period, including capital contributions. 5.1.5.3. Schedule of projected income and expenses during operation certified by the proposed management agent. 5.1.5.4. Pro forma with income and expense cash flow, (a) for a 20-year period If only requesting HOME, HTF or CDBG-MIT for new construction (term for rehabilitations will vary depending on the funding per unit) or (b) a 30-year or any other more restrictive compliance period, showing: a feasible operation; preparation according to the applicable program underwriting standards; all sources and income, including commercial, residential, and ancillary income; vacancy adjustment; Tax Credit equity, CDBG-MIT funds, HOME, HTF funds, other governmental subsidies or contributions, private equity, and permanent financing that (based on the established parameters) a project would be eligible to receive; all uses and expenses, including partnership distributions, debt service, non-cash expenses such as depreciation and amortization of fees and principal; reserves-all of which must be certified by the proposed management agent. 5.1.5.5. Construction costs breakdown, that substantially conforms with form HUD 2328 (form not required), certified by the proposed general contractor or project designer. 5.1.5.6. Appraisal report of site(s) and structure(s) prepared by a licensed appraiser unaffiliated with the Developer, the development, or any other entity involved with the Project, and approved by the Authority, within one year of the application. 5.1.5.7. Projects with permanent financing other than the Authority's will need a letter of intent from the relevant financial institution. Applicants must submit a firm commitment letter to finalize the allocation of Tax Credits. This letter should detail: amount and term of the loan, fixed interest rate, non-recourse nature of the loan, amortization period, pre-payment penalties, and collateral requirements. All projects applying for Tax Credits and debt financing from the Authority must present the loan application to the Authority on or prior to the Tax Credit application's submittal. 5.1.5.8. Letter of intent from syndicator or direct investor evidencing available private equity and indicating the credit price. 5.1.5.9. A letter of intent indicating available funding issued by the Rural Development Housing Service of the US Department of Agriculture (RD) for projects that are financed or sponsored by that entity. Applicants must submit a firm commitment letter to finalize the allocation of Tax Credits. 5.1.5.10. If applying for 4% Tax Credits and tax-exempt financing: Certification from the financing institution stating the tax-exempt status of the obligations to be issued to finance the project, if requiring tax exempt financing. Opinion from the Owner's Tax Attorney and/or CPA stating the taxexempt status of the obligations to be issued to finance the project, if requiring tax-exempt financing. 5.1.5.11. Written justification for exceeding any of the safe harbor parameters for general contractor fees but in no circumstance, in excess of the maximum allowable aggregate amount. 5.1.5.12. Statement with the terms of the deferred developer fee, including whether it will be used to fund the operating reserve and to be repaid from cash flow. Such statement shall confirm compliance with the terms of the Operating Reserve subsection of Section 5.2.3.5 hereof. 5.1.5.13. Written evidence for projects claiming and/or receiving (or not) tax exemptions (e.g., property tax waivers, rental income exemptions). 5.2. Development Budget and Pro Forma Assumptions Review 5.2.1. Description The Authority will evaluate the proposed sources and uses of funds detailed schedule and cash flow to ensure that all costs set forth for the project are reasonable and conform to the Authority's underwriting parameters. The Authority will use its parameters and resulting metrics to review project feasibility, determine need, and allocate Tax Credits and gap financing. Projects applying for CDBG-MIT funds must comply with the CDBG-MIT Program Guidelines (Annex P), all applicable guidelines in the Federal Register (for example, guidelines on Duplication of Benefits (84 FR 28836) and Cost Principles (2 CFR 200 Subpart (E)), and any other applicable federal and state requirements. The Authority will perform an underwriting analysis and subsidy layering review on all proposal applications that request CDBG-MIT funding under a NOFA (see Annex P). Applicants for CDBG-MIT funds must disclose all federal funds obtained from any source from the date of a disaster until the date of the application. Each project will undergo a Duplication of Benefits (DOB) review prior to issuing an award to ensure that duplicative assistance is not provided. As part of this review, PRHFA will verify that submitted documentation is accurate and current at the time of the award, to the extent possible. Any assistance determined to be duplicative assistance must be deducted from the program's calculation of the Applicant's total need prior to awarding federal assistance. To address any potential duplication of benefits, the federal funds agreements will include provisions requiring repayment of any assistance later received for the same purpose as the federal funds. If a DOB is identified, PRHFA will recapture funds to the extent by which they are in excess of the need and duplicative of other assistance received by the Project for the same purpose. The recapture method and timeframe will be consistent with 2 CFR Part 200 or other applicable cost principles. Complete recapture provisions will be included in the federal grant agreement. Projects claiming and/or receiving (or not) tax exemptions (e.g., property tax waivers, rental income exemptions) must present written evidence. Projects requiring funds other than a Tax Credit allocation must conform to the corresponding subsidy layering review to determine the appropriate level of funding under each program 5.2.2. Allowable Costs and Expenses 5.2.2.1. Developer Fee The Developer Fee includes the developer's overhead, profit, and consultants, and all other fees paid in connection with the project for services that would ordinarily be performed by a developer. The consultants are professionals advising the Developer in matters other than architectural, engineering, accounting, legal, environmental consulting, and construction management which are reimbursable through LIHTC. Consultants paid by the syndicator are also excluded. The Applicant must submit a copy of each consultant contract that itemizes the services to be performed by such consultant and the fees to be charged for each service or group of services. Developer Fees for new construction projects will be restricted to fifteen (15%) of the development cost estimate. For purposes of this calculation, development costs include all budgeted costs except the land and developer fees and costs (overhead, profit, real estate attorney, consultant, and any other identified party). For rehabilitation projects, the Developer Fee will be limited as follows: The Developer Fee for the acquisition portion will be limited to 4% of the acquisition costs (not including land) or a minimum of $15,000. The Developer Fee for the rehabilitation portion will be restricted to fifteen (15%) of the development cost estimate. For purposes of this calculation, development costs include all budgeted costs except costs associated with the acquisition portion, land, and developer fees and costs assigned to the rehabilitation (overhead, profit, real estate attorney, consultant, and any other identified party). If there is an identity-of-interest, the Developer Fees will be subject to the limitations stated on section 5.2.2.3 below. 5.2.2.2. General Contractor Maximum Charges Builder's Profit: Six percent (6%) of construction contract amount Builder's Overhead: Two percent (2%) of construction contract amount General Conditions: Six percent (6%) of construction contract amount The total allowed percentages for Overhead, Profit, and General Conditions are based on hard construction costs. The maximum combined costs shall not exceed fourteen percent (14%) of the hard construction costs stated on the AIA construction contract. 5.2.2.3. Identity-of-Interest Limitations PRHFA will impose restrictions on the amount of certain fees in the following identity-of-interest situations: An identity-of-interest between the seller and buyer of real estate, on rehabilitation developments, results in a developer fee limitation as follows: The Developer Fee for the acquisition portion will be limited to 3% of the acquisition costs (not including land) or a minimum of $10,000. The developer fee for the rehabilitation portion of a project will be limited to 10% of development costs. For purposes of this calculation, the rehabilitation portion includes all budgeted costs except the acquisition portion, land, and developer fees assigned to the rehabilitation portion (overhead, profit, real estate attorney, consultant, and any other identified party), as defined by HUD's Management Agent Handbook (4381.5) cited above. When an identity-of-interest exists between the Developer, Owner, and General Contractor the combined total of the general requirements, contractor's profit and overhead, consultant's fee, real estate attorney's fee, developer's fee, and developer's overhead will be limited to 20% of TDC. Notwithstanding the foregoing, the Authority reserves the right, in its sole discretion, to adjust the timing of payment of the Developer's Fee at any time to achieve or maintain a project's feasibility and long-term viability. 5.2.2.4. Per-Unit Minimums Rehabilitation expenditures during any twenty-four (24) month period will be the greater of: Twenty percent (20%) of the adjusted basis of the building being rehabilitated or $6,000 per low-income unit in the building (qualified basis attributable to such expenditures divided by the number of low-income units), plus the inflation adjustment factor as per applicable laws and regulations. 5.2.2.5. Per-Unit Cost Review The Authority may appoint an independent consultant to validate the construction or rehabilitation costs in projects that passed the basic threshold requirements. The consultant may evaluate: the site, including demolition, earthwork, drainage, pavement, curbs, sidewalks, parking, landscaping, water, sewer, storm drainage, gas and electric utilities and lines; structural, plumbing, electrical, fire protection, and vertical transportation systems; building envelope, thermal insulation, and air infiltration control systems; interiors, including units, common area finishes, and disabled persons accessibility improvements; energy efficiency and green technologies; construction methods, value engineering assumptions, cost index factors and sources and documentation of itemized costs submitted; and construction insurance and general and special conditions. 5.2.2.6. Acquisition Costs The acquisition price will be limited to the less of the sale price or the appraised value of the land and the property. If the seller is a municipal and/or governmental seller any rehabilitation costs already incurred on properties not yet placed in service and properly certified will be considered part of the acquisition price. Low-Income Housing Tax Credits 2025-Qualifled Allocation Plan 5.2.3. Underwriting Parameters 5.2.3.1. Vacancy Rate: 5% for projects with project-based rental assistance 7% in all other projects 5.2.3.2. Income and Reserve for Replacement: 3% annual growth in rents, other income, and reserve for replacement. 5.2.3.3. Operating Expenses: 3.5% annual growth 5.2.3.4. Debt Service Coverage Ratio (DSCR). PRHFA requires a minimum 1.15x DSCR, and a maximum 1.45x DSCR for projects with Section 8 rental assistance, for the term of the permanent debt financing. In this case, DSCR represents the proportion of the development's net operating income (operating income minus operating expenses and reserve payments) to foreclosable, currently amortizing debt service obligations. 5.2.3.5. Required Reserves Rent-up Reserve. Shall be reasonable based upon projected rent-up time according to market and target population, but in no event less than $250 per unit. Operating Reserve. Shall be the greater of four (4) months of: (a) projected operating expenses, (b) debt service, and (c) replacement reserve payment or the amount required by the syndicator, financing or regulatory agency. Evidence of such requirement must be submitted with the application. This reserve must be maintained throughout the term of the Tax Credit extended use period. Deferring the developer's fees of the project can allow the project owner to fund the operating reserve. In that case, the developer's deferred fee can only be repaid from cash flow and after all required replacement reserve deposits are made. Such fee will be projected to be repaid within 10 years and must meet the IRS standards. A statement with the terms of the deferred fee must be included. Replacement Reserve: Projects with 100% project-based assistance: $250 per unit per year All other projects: $300 per unit per year If a higher amount is presented, evidence from the entity requesting said Replacement Reserve must be filed. Other Reserves: If other reserve account is included, evidence, together with its terms and conditions, from the entity requiring such reserve must be filed. HOME/HTF or CDBG-MIT funds cannot be used for project's reserves. The use of interest income earned on any type of reserve fund, or the release of any type of reserve funds will be considered a source of revenue for a project only on a case-by-case basis and subject to financial feasibility. 5.2.3.6. Project-Based Rental Assistance The Authority will underwrite the rents according to Tax Credit limits except for projects that intend to use project-based rental assistance (e.g., Section 8, or any other rental assistance), which will be underwritten as per applicable regulations, provided written, valid, and unexpired evidence is submitted (e.g., award letter indicating gross rents approved for the project, notice of anticipated RAD Rent, or executed rental subsidy agreement). These limits are based on annual HUD data. If Section 8 HAP contracts, or relevant legislation, allows rents above those limits, a project may be credited for the additional revenue based on such higher rents. 5.2.3.7. Profit and Return on Operations A project's annual net cash flow, after the payments of operational expenses, replacement reserve and any permanent loan, cannot exceed 10% of the project's operating expenses, depending on each project's circumstances. 5.2.3.8. Tax Credit Percentage 9%: The credit percentage available for new construction or rehabilitation. (Under Section 42(b)(2), the applicable percentage for buildings placed in service after July 30, 2008, shall not be less than 9%). 4%: the credit percentage available for existing housing or for federally subsidized new construction or rehabilitation. (Under Section 42(b)(3), the applicable percentage for LIHTC allocations made after Dec. 31, 2020, shall not be less than 4%. This applies to any building that receives an LIHTC allocation after Dec. 31, 2020, and in the case of any building any portion of which is financed with an obligation described in IRC Section 42(h)(4)(A), any such building if any such obligation which so finances such building is issued after Dec. 31, 2020.) 5.2.3.9. Equity Pricing The Authority will use the price submitted by owners through a letter of intent/commitment from the investor/syndicator confirming the financial assumptions of the purchase. 5.2.4. Record and Notification The Authority will record and issue an itemized notice, when it provides notification of a Tax Credit reservation, or lack thereof, of amendments to the pro forma financial statements and changes to development costs, operating expenses, reserves, and underwriting assumptions. 5.2.5. Cure Period The Authority retains the sole and absolute right to determine that an application is substantially incomplete and ineligible for further review. The Authority may choose to allow for the immediate correction of minor/immaterial defects in an application. Should the Authority choose to allow correction, Applicants will be given a pre-defined 5-working day cure period (which excludes weekends and legal holidays) from the time of the Authority notification to cure defects with their application. If the Authority allows an applicant to cure minor defects, that does not constitute approval or acceptance of the application and is not an assurance that the application, upon further review, will be deemed acceptable. Items considered curable are as follows: The applicant may provide a required signature that has been omitted, unless the application was deemed substantially incomplete by the Authority. The applicant may provide missing pages of incomplete documents. The Authority shall notify the Applicant of any curable defects it discovers by telephone and/or by electronic mail (e-mail). If an Applicant fails to respond to the Authority's notification of curable defects within the 5-working day cure period, or if an Applicant's response is non-responsive to the question asked, a negative conclusion shall be drawn. Failure to respond to an item in a cure notification will result in the denial of the points in the category, or the application may be deemed to not meet threshold requirements. 5.3. Underwriting and Financial Feasibility Analysis 5.3.1. Description The Authority shall evaluate the amount of Tax Credits, subject to its placement in the Point Ranking System, after it has determined that a project satisfies all basic qualification requirements, that proposed costs and expenses are reasonable and within the prescribed standards, and that underwriting parameters conform to Authority guidelines.