of the Code requires the 2025-QAP to include certain selection criteria, including:

project location; housing needs characteristics; project characteristics, including whether the project includes the use of existing housing as part of a community revitalization plan; sponsor characteristics; tenant populations with special housing needs; public housing waiting lists; tenant populations of individuals with children; projects intended for eventual tenant ownership; energy efficiency of the project; and historic nature of the project. Every project, including those financed with tax-exempt obligations issued after December 31, 1989, must satisfy the requirements for an allocation of Tax Credits. However, projects financed through tax-exempt obligations are not subject to the Tax Credit ceiling described in Code and updated annually in IRS bulletins (Annual Tax Credit Volume Cap). The Authority may use, at its discretion, the priorities and point rankings set forth to allocate certain other funding sources that it is entrusted to administer by state law or Board of Directors Resolutions. Furthermore, the Authority encourages and promotes the leverage of private and public funds to maximize the utilization of Tax Credits and to create a larger affordable housing stock. 3. Housing Needs Assessment 3.1. Priorities identified in the Public Policy of Puerto Rico Given the demographic, social, economic, and environmental transformations the Island has undergone in recent years and the way these impact housing, it was deemed necessary to update the State Housing Plan. The State Plan is a long-term, multi-year plan covering the period 2025-2030. Throughout the various planning stages, the economic, environmental, social, and health conditions that have affected Puerto Rico in recent years were examined in depth, in order to propose measures within a broad public policy framework. As a result of the 2025-2030 planning process, five strategic goals emerged aimed at addressing ten priority areas of need identified by the various stakeholders and secondary sources consulted for the Plan, these are: 1. Increase production and balanced access to affordable housing in Puerto Rico 2. Strengthen the ecosystem of supportive services associated with tenancy and housing stability for vulnerable populations. 3. Promote a coordinated response to the housing situation built on the union of multisectoral efforts and an integrated public policy. 4. Strengthen the institutional and implementation capacity of the public, private, non-profit, and community sectors linked to housing. 5. Advance the development of resilient and sustainable cities. In the context of the social and economic situation that Puerto Rico has faced, there are population groups whose condition and needs have been accentuated, which also implies changes in the nature and needs linked to housing. Those special needs population groups are: Elderly Single-parent households with children under 18 years of age Youth headed households (between 18-24-years-old) homeless people Persons with HIV/AIDS Persons with disabilities Therefore, the Authority seeks to promote in this 2025-QAP: production and/or rehabilitation of low- and moderate-cost housing; acquisition of housing for the vulnerable sectors which are in constant growth (elderly, singlefamily, young family, homeless, HIV-positive patients and persons with disabilities); more flexible construction for housing; and development of resilient and sustainable projects. 3.2. Priorities identified in the Puerto Rico Disaster Recovery Action Plan In response to Hurricanes Irma and María, Puerto Rico has developed a Disaster Recovery Action Plan (Action Plan) to define how the Island will address the urgent humanitarian needs of its residents while also developing and implementing a transformative recovery. This recovery is based on the available funding to recover and rebuild, and just as importantly, to stimulate economic growth in every affected community. The impact and unmet needs analysis outlined in the Action Plan reveals a strong need for housing assistance supported by resilience planning and economic opportunity for households. Pursuant to the Federal Register Notice 85 FR 4676, the U.S. Department of Housing and Urban Development (HUD) allocated $8.285 billion in CDBG-MIT funds to Puerto Rico for mitigation activities, the largest allocation of CDBG-MIT funds distributed between a total of eighteen (18) HUD grantees. For the current CDBG-MIT Action Plan, see CDBG-MIT Action Plan - CDBG-DR/MIT Recovery Funds for the English version and Plan de Acción CDBG-MIT - Recuperación Fondos CDBG-DR/MIT for the Spanish version. 1 Hurricane Force Winds 2 Flood (100-year) 3 Earthquake 4 Landslide 5 Liquefaction 6 Drought 7 Severe Storm 8 Sea Level Rise (10 ft) 9 Wildfire 10 Human Hazard 11 Fog 12 Lightning 13 Category 5 Storm Surge 14 Tornado 15 Tsunami 16 Wind 17 Hall 18 High Temp Puerto Rico has approximately 390,000 renter-occupied housing units across the Island, making up roughly one-third of all occupied housing units in Puerto Rico.¹ More than seventy-six percent (76%) of the Island's rental stock was constructed before 1990.² The risk assessment for rental housing 1 American Community Survey, Census 2022, S2502 at https://data.census.gov/table?q=S2502&g=040XX00US72. 2 Estudios Técnicos, Inc. (Ed.). (2018). Report on the Housing Industry Situation (pp. 5-6). San Juan, PR: Puerto Rico Builder's Association. identifies areas where the most renters facing a very high or extreme risk factor for landslides and flooding reside. A similar analysis was performed for renters facing a medium-high or high-risk factor for flooding. By providing lower-risk housing options in areas where fewer such housing options exist, risk can be mitigated. The total number of rental housing units in each municipality of Puerto Rico was determined using census data. This data was then analyzed against the hex grid data identifying areas at high risk of flooding and landslide in the Action Plan³ to estimate the number of rental housing units that are subject to higher levels of risk for flooding and landslides both across Puerto Rico and in each municipality. Following are summaries of these analyses: Rental Units in Medium to High Flood Risk-Puerto Rico Medium Medium High High Total Units in Risk % Units in Risk 31,049 24,105 55,239 110,393 28.33% Rental Units in High to Extreme Landslide Risk-Puerto Rico High Very High Extreme Total Units in Risk % Units in Risk 122,960 67,344 14,098 204,402 52.45% With so many units across the Island in elevated risk areas, the need for a program that focuses on mitigating the risks threatening the rental housing stock is clear. Continuing this analysis, individual municipalities have been identified which have the greatest proportion of their rental housing stock in the highest risk areas for flooding and/or landslides. These municipalities (shown in the tables below) contain the fewest rental housing options available for their citizens, and targeting assistance to them can help to address the risk mitigation needs of renters who are most likely to live in a highrisk area for flooding and/or landslides. Municipalities with more than 50% of rental units in Medium to High Flood Risk Areas Municipio Rental Units in Risk Total Rental Units % in Medium to High Flood Risk Cataño 3426 3,481 98.42% Loíza 2488 2,619 95.00% Salinas 1464 2,290 63.93% Ponce 9865 15,995 61.68% Toa Baja 4844 7,866 61.58% Carolina 11397 19,033 59.88% Guánica 976 1,652 59.08% Añasco 1412 2,402 58.78% Arroyo 836 1,425 58.67% Luquillo 1098 2,056 53.40% Humacao 2264 4,473 50.61% Mayagüez 6909 13,795 50.08% 3 See Figure 12: 100-Year Flood Zone Hazard Areas on pg. 34 and Figure 17: Rain Induced Landslide Susceptibility Areas on pg. 41. Municipalities with more than 50% of rental units in Very High to Extreme Landslide Risk Areas Municipio Rental Units in Risk Total Rental Units % in Very High to Extreme Risk Las Marías 706 699 100.00% Maricao 484 485 99.79% Comerío 2405 2,411 99.75% Orocovis 2157 2,167 99.54% Naranjito 2784 2,799 99.46% Barranquitas 2921 2,949 99.05% Aguas 3058 3,101 98.61% Buenas Ciales 1463 1,534 95.37% Jayuya 1788 2,011 88.91% Adjuntas 1422 1,698 83.75% Corozal 2166 2,608 83.05% Utuado 3355 4,215 79.60% San Lorenzo 2554 3,831 66.67% Aibonito 1343 2,026 66.29% Rincón 1014 1,607 63.10% Patillas 1221 1,953 62.52% Lares 2121 3,402 62.35% Villalba 1091 1,800 60.61% Cidra 2760 4,677 59.01% Morovis 1648 2,840 58.03% The LIHTC-MIT Program will provide funds to qualifying entities that propose projects which incorporate at least one of the mitigation strategies described above and prioritize projects in areas with the lowest proportion of rental housing units outside the highest risk areas. As a significant portion of the population, renters need housing options that are protected against the risks impacting Puerto Rico to the greatest extent possible. Based upon the risks identified in the Risk Assessment in the Action Plan, specifically for housing structures, PRDOH has determined that the LIHTC-MIT program will prioritize mitigating risks presented by flooding and landslides. These risks can be mitigated through strategic site selection, as risk severity is based heavily on geographic characteristics, unlike other risks which are either associated with exceptional natural events or are less site-specific across Puerto Rico. Any assisted housing development, however, must still incorporate building standards and methods which mitigate other risks that threaten structures in Puerto Rico as identified in the Action Plan. Therefore, the LIHTC-MIT program will provide approximately $83.8 million⁴ to help finance developments that mitigate risks for rental housing through the following: 4 Pursuant to the Community Development Block Grant - Mitigation (CDBG-MIT) Leverage for Low -Income Housing Tax Credits Program - Mitigation Subrecipient Agreement (SRA) entered on June 6, 2025 by and between the Puerto Rico Department of Housing (PRDOH) and the Puerto Rico Financing Authority (PRHFA), PRDOH allocated $100 million in CDBG-MIT funds to the LIHTC-MIT program, of which $83.8 million were assigned for Project Development Costs (Grant Funding). 1. Rehabilitating existing structures to incorporate modern building codes and methods such as elevation that make the residential structure more resilient against the impacts of natural disasters; and 2. Building new resilient rental housing options utilizing strategic site selection outside areas where the geography presents localized risks. In accordance with the priorities outlined in the Action Plan, the PRHFA seeks to promote: Development of affordable residential rental housing that targets the special needs population groups; Implementation of mixed-finance strategies to generate high-quality, diversified housing options across all incomes; and Transform development sites into sustainable and viable communities. 4. Housing Priorities 4.1. Criteria Pursuant to Section 42(m)(1)(B)(i) of the Code, Section 5.4 of this 2025-QAP details the selection criteria used to determine housing priorities that are appropriate for local conditions, and to implement the policies of Puerto Rico's government. Through the LIHTC Program the Authority wants to address the priorities identified in the Public Policy of Puerto Rico defined above. In order to impact as many municipalities as possible we will encourage the development of small- and medium-sized projects around the Island. Therefore, during the 2025 allocation cycle all projects must have no more than one hundred and twenty-five (125) units. 4.2. Basis Boost Policy: 30% basis boost. 4.2.1 Pursuant to Section 42(d)(5)(B)(v) of the Code, 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). This designation seeks to encourage the development of projects in urban centers, including those in municipalities that are underserved by being excluded from a designated DDA or QCT, while targeting the rehabilitation of urban areas consistent with the public policy of Puerto Rico (see Annex D for a list of QCTs and DDAs). 4.2.2 Outside of a QCT, DDA, or the previous designations, any project the Authority determines needs a basis boost to be economically feasible will receive the thirty percent (30%) allowed. The Authority will determine during the underwriting process if a Statedesignated basis boost is required for financial feasibility. 4.2.3 The following are the exceptions to the 30% basis boost: It does NOT apply to the acquisition costs of existing buildings or any related acquisition fees. The discretion described in this section 4.2 does not apply to projects with tax-exempt financing, under section 42(h)(4) of the Code, not subject to the Annual Tax Credit Volume Cap (i.e., 4% LIHTC projects). Rehabilitation costs of these projects will be eligible for the 30% basis boost only if located in a QCT or DDA (see Annex D). 4.3. Set-Asides 4.3.1. Nonprofit Set-Aside There will be a set-aside for nonprofit-owned/developed projects equal to ten percent (10%) of PRHFA's Annual Tax Credit Volume Cap. Unallocated Tax Credits under the setaside following the close of applications for the cycle become unused carryforward in the following year's Tax Credit allocation round. If Tax Credits are exhausted in a designated set-aside pool, all projects submitted for such set-aside pool will compete in the general pool or, if eligible, in another available set-aside pool. The Authority may designate additional Tax Credit set asides. 4.3.2. Tax-exempt bond-financed projects These projects are not subject to the above set-aside considerations. 5. Tax Credit Allocation Methodology and Criteria 5.1. Initial Submission: Basic Threshold Qualifications To be considered for a reservation of Tax Credits, and have the opportunity to be ranked pursuant to the Point Ranking System in Section 5.4 below, all Applicants must submit an application that will be made available on the Authority's website (www.afv.pr.gov). Interested Applicants must follow the process and submit all required documents, including full payment of fees, and demonstrate that the owner and the project meet the initial basic threshold qualifications by the relevant deadlines. Instructions for completing the Application will be available on PRHFA's website. Questions regarding the application process must be submitted via email to 2025qap.comments@afv.pr.gov. 5.1.1. Application The project must demonstrate it is or will be a qualified residential rental project with the basic income and rent restrictions of Section 42 of the Code (See Annex C, Low- Income Housing Tax Credits Program Maximum Rents), as evidenced by the following: 5.1.1.1. NOFA Application, duly completed, signed by an authorized officer, sealed, certified and notarized. 5.1.1.2. Corporate resolution certifying that the person who signed the application is a duly authorized officer of the applicant, authorized to sign the application. 5.1.1.3. Application Checklists: Basic Threshold, Point Ranking, Subsidy Layering Review, and Site Selection Standards, when applicable. 5.1.1.4. Applicant's transmittal letter and payment of Application fees described in