Ley 198 del 2007

(S. B. 1530) (Conference) (No. 198) (Approved December 14, 2007)

AN ACT

To amend Act No. 47 of June 26, 1987, as amended, known as the "Public and Private Sector Copartnership for the New Housing Operation," to amend subsections

(d) ,

(e) and

(h) of Section 2; to amend subsection

(a) of Section 4; to amend subsection

(e) of Section 5 and the last paragraph of Section 8, in order to increase the maximum sales price of affordable housing units to ninety thousand (90,000) dollars for single family units, one hundred five thousand (105,000) dollars for multi-family units, and to one hundred ten thousand (110,000) dollars for single family units or multi-family units in urban centers, except when located in the urban centers of the municipalities of San Juan, Guaynabo, Bayamón, Vieques or Culebra, where the total sales price shall not exceed one hundred twenty-five thousand (125,000) dollars, to extend the term of effectiveness of the program created by virtue of the provisions of said Act until July 1, 2010; and for other purposes.

STATEMENT OF MOTIVES

The Federal and Commonwealth incentives for the construction of affordable housing have had a very positive and effective impact on the construction of new housing at affordable prices for moderate-income families. One of the programs that has offered the most incentives for the construction of affordable housing is the "Affordable Housing Subsidy Program" created by Act No. 124 of December 10, 1993, as amended. The benefits provided in the aforementioned Act are addressed primarily to families that still do not own a home, offering them financial assistance for

---

the down payment and the monthly mortgage payments thereof. In essence, the Program is based upon the correct premise that by giving assistance to eligible affordable housing buyers the market risk of the developer of the project is reduced, which in turn allows the broadening of the universe of persons that qualify to purchase a dwelling.

The application of Act No. 47 of June 26, 1987, as amended, known as the "Public and Private Sector Copartnership for the New Housing Operation," complements the Program established through Act No. 24, supra. Said Act was adopted in order to promote and achieve close cooperation between the government sector and the private sector which would solve, in some measure, the problem of housing shortage faced by low or moderate-income families and middle-class families. Through the Program created by the above mentioned Act No. 47, the private sector invests the capital and assumes the investment risks, while the Government grants to said sector certain incentives translated into specific tax exemptions as a stimulus to their investment and risks. It also offers this sector the opportunity to acquire land owned by the Commonwealth that does not have public use, provided that said land is used for the development of projects for middle-class and affordable housing units to be sold or rented to said families, in accordance with the parameters established by law. Notwithstanding the above, economic and inflationary factors, the significant rise in the value and the scarcity of land in Puerto Rico and the permits process, have made increasingly more difficult the function of promoting and creating incentives for the construction of affordable housing. The costs of acquiring land and construction in Puerto Rico are extremely high and have a dissuasive effect on the development of new affordable housing, especially in the municipalities of San Juan, Guaynabo,

---

Bayamón, Vieques and Culebra. The maximum price of $80,000 per housing unit, established in Act No. 47, as amended, does not make housing construction feasible. It is therefore necessary to increase the maximum sales price of such housing to $90,000 for single family units and $105,000 for multi-family units. Likewise, and in harmony with the public policy regarding the development and repopulation of the urban centers, it is pertinent to increase the maximum sales price of single or multi-family units located therein to $110,000, except when located in the urban centers of the municipalities of San Juan, Guaynabo, Bayamón, Vieques or Culebra, in which the total sales price shall not exceed one hundred twenty-five thousand (125,000) dollars.

The definition of a low or moderate-income family is hereby adjusted in order to include persons whose income does not exceed 40% of the maximum insurable by the Federal Housing Administration (FHA). This new definition broadens the base of beneficiaries and gives certainty to the concept of what constitutes these low or moderate-income families that need assistance in acquiring housing. In turn, the definition of middle-class family or person is hereby amended to increase the maximum insurable percentage under FHA, from thirty-five percent (35%) to sixty percent (60%) to allow for a broader sector to benefit from the different housing programs in Puerto Rico.

Lastly, it is also the purpose of this Act to extend the term of the Program to be eligible for the tax benefits and incentives provided by the statute in effect, which ends on July 1, 2007. The extension of the term until the year 2010 is essential for the tax incentive to serve as a stimulus for the developers, and for these to continue with the construction of affordable housing.

---

BE IT ENACTED BY THE LEGISLATURE OF PUERTO RICO:

Section 1.-Subsections

(d) ,

(e) and

(h) of Section 2 of Act No. 47 of June 26, 1987, as amended, are hereby amended to read as follows: "Section 2.—Definitions. For the purposes of this Act, the following terms shall have the meaning expressed hereinbelow:

(a) $\qquad$

(d) 'Middle-class family or person' means any family or person who does not own a home and whose annual income exceeds the income established for low or moderate-income families by the affordable housing programs of the Government of the Commonwealth of Puerto Rico or the Government of the United States of America, up to sixty percent (60%) of the maximum amount insurable by the Federal Housing Administration (FHA) for the area.

(e) 'Low or moderate-income family' means any person who does not own a dwelling and whose annual income does not exceed that established for low or moderate-income families by the affordable housing programs of the Government of the Commonwealth of Puerto Rico or the Government of the United States of America, up to forty percent (40%) of the maximum amount insurable by FHA for the area.

(f) 'Multi-family project' ...

(g) 'Middle-Class Housing' ...

(h) 'Affordable Housing' means, in the event of a sale, those units whose maximum sales price does not exceed ninety thousand (90,000) dollars for single family units and one hundred five thousand (105,000) dollars for multi-family units. For these purposes, the specifications and prices of the basic affordable housing unit shall be established by

---

regulations. The maximum sales price of the basic unit shall likewise be determined by municipality, taking into consideration its location, the maximum amount of the mortgage insurable by the Federal Housing Administration (FHA), and the generally accepted rules and parameters in the construction industry. In the case of single family or multi-family units located in urban centers, the total sales price shall not exceed one hundred ten thousand (110,000) dollars, except when they are located in the urban centers of the municipalities of San Juan, Guaynabo, Bayamón, Vieques or Culebra, where the total sales price shall not exceed one hundred twenty-five thousand (125,000) dollars. The housing units that qualify for this Program shall be those located in the urban center of every municipality, as delimited by the Municipality and the Office of the Director of Urbanism. In the determination of the total sales price, improvements to the basic housing unit specifications may be taken into consideration, in which case, an increase in the selling price that shall not exceed fifteen percent (15%) of the basic unit's price may be authorized. However, in no case shall the total sales price of an affordable housing unit exceed the maximum established in this subsection. In the case of multi-family rental housing projects, 'affordable housing' means the simple structure, in rows, with pedestrian access and multi-level, destined for residential use by medium, moderate, and low-income families, when they are promoted or developed by the Department of Housing or its operational bodies. Likewise, those developed by the Department of Housing. Likewise, those developed by private enterprises for medium, moderate, and low-income families, when the families are benefited directly or indirectly by the state or federal government public welfare programs. (I) ..."

---

Section 2.-Subsection

(a) of Section 4 of Act No. 47 of June 26, 1987, as amended, is hereby amended to read as follows: "Section 4.-Tax Exemption on Income Derived from the Sale of Housing

The income received by an owner of a newly-constructed or rehabilitated affordable housing project from the sale thereof, shall be exempt from the payment of income taxes, provided that:

(a) The construction or rehabilitation of the housing units for sale has begun after the effective date of this Act and before July 1, 2010.

(b) ..." Section 3.-Subsection

(e) of Section 5 of Act No. 47 of June 26, 1987, as amended, is hereby amended to read as follows: "Section 5.-Exemption from Payment of Taxes on Income Derived From the Renting of Housing

The income received by the owner of a multi-family affordable housing project destined to be rented shall be exempted from the payment of income taxes and up to ten percent ( 10% ) of the yield on the capital invested in the acquisition and construction or rehabilitation of the property, provided that:

(a) ...

(e) The construction or rehabilitation of the housing units to which said rental income is attributed that commenced after the approval of this Act and before July 1, 2010.

Section 4.-The last paragraph of Section 8 of Act No. 47 of June 26, 1987, as amended, is hereby amended to read as follows:

---

"Section 8.-Sale of Public Lands for Affordable and Middle-Class Housing

The agencies of the Government of the Commonwealth of Puerto Rico are hereby empowered to sell, with the prior approval of the Planning Board, any land owned by them, or any interest in them to natural or juridical persons subject to the following conditions:

(a) ...

(e) ...

In each transaction for the sale of land, the Secretary of Housing, the Secretary of the Treasury, and the President of the Government Development Bank shall jointly ensure that a subordinate obligation for the difference between the appraised value and the agreed sales price is constituted. The purpose thereof is to guarantee that the deferred value will revert to the public treasury in the event of a latter profitable sale of the individual units, or the sale and exchange of one of the rental housing projects within the periods established by regulations, and that the construction activities of the housing projects to be developed are initiated after the approval of this Act and before July 1, 2010."

Section 5.—Applicability Those units that, as of the date of effectiveness of this Act, are subject to an option to purchase or purchase and sale contract at a specific price shall be deemed affordable housing only if their sales price does not exceed the price agreed upon in said option to purchase or purchase and sale contract. The owner of a unit whose sales price exceeds the price in the option or purchase and sale before the effective date of this Act may not claim the tax benefits established thereunder and shall be compelled to

---

notify the administrator of the program of the price change and the reasons therefor.

Section 6.—This Act shall take effect immediately after its approval.

---

CERTIFICATION

I hereby certify to the Secretary of State that the following Act No. 198 (S.B. 1530) (Conference) of the $4^{ ext {th. }}$ Special Session of the $15^{ ext {th }}$ Legislature of Puerto Rico:

AN ACT to amend Act No. 47 of June 26, 1987, as amended, known as the "Public and Private Sector Copartnership for the New Housing Operation," to amend subsections

(d) ,

(e) and

(h) of Section 2; to amend subsection

(a) of Section 4; to amend subsection

(e) of Section 5 and the last paragraph of Section 8, etc, has been translated from Spanish to English and that the English version is correct.

In San Juan, Puerto Rico, today $15^{ ext {th }}$ of April of 2008.

Francisco J. Domenech Director