Since Puerto Rico’s economic crisis in 2006, the island’s housing market has faced a growing and evolving set of challenges. The widespread devastation of hurricanes, earthquakes, and natural disasters in general, severely worsened an already existing housing problem. Hurricane Irma and Maria alone damaged over 725,000 households, representing nearly 60% of all occupied housing units on the island (Lamba Nieves & Santiago Bartolomei, 2022). A combination of such factors resulted in the depreciation of home values, an increasing amount of foreclosures, a shortage in affordable housing, and more recently, the rising cost of rent (Hinojosa & Meléndez, 2018). In this context, the proliferation of short-term rentals (STRs) on the island through digital platforms like Airbnb and Vrbo has been a recent source of public controversy because of their potential role in further exacerbating the housing crisis.
Independent journalism coming from within the island has shed light on several instances of displacement and eviction of locals due to the expansion of the short-term rental market (Graulau, 2021). The Puerto Rican working-class’ difficulty in coping with the increased cost of living has generated a strong sense of opposition to the expansion of STRs on the island. The concern here is that wealthier individuals purchase affordable housing units and turn them into highly profitable STRs, which ultimately cuts the supply of long-term rentals (LTRs) and therefore raises prices (Choudhry, 2022).
With that said, there are also proponents of the industry that argue it provides the island with much-needed economic activity. An Oxford Economics study commissioned by Airbnb highlighted how the STR business contributed to the local economy. In 2021, Airbnb guests in Puerto Rico spent $1.7 billion, making up 23.4% of all tourist spending activity. The study also found that this directly supported $872.4 million in GDP, $460.4 million in wages, and 24,000 jobs on the island (Oxford Economics, 2022). As the Puerto Rican government attempts to bounce back after years of debt restructuring, the top priority has now shifted towards promoting economic growth which can certainly make these figures and the STR industry appealing. When it comes to the issue of affordable housing specifically, proponents also point to other contributing factors besides the growth of STRs, such as the general lack of investment in these projects and the increasing construction costs associated with inflation in a post-pandemic market (Suárez et al., 2022). These variables reflect global challenges that are not unique to Puerto Rico and have surely impacted the housing crisis on the island. The question this raises is not whether short-term rentals are the sole contributing factor, but rather how much of a role they play in exacerbating the housing crisis.
Recent reports have tackled this exact question head on by taking a closer look at the relationship between the expansion of short-term rentals and their direct impact on the housing situation in Puerto Rico. A study commissioned by Rebook STR to Abexus Analytics found that in 2014 there were 1,442 units in operation, and by 2022 that number had risen to 17,138 units (Hernández, 2022). In other words, the number of STRs saw a tenfold increase in less than a decade. In San Juan, Cataño, and Aguadilla, STR units represented more than half of all available housing units (Schaal, 2023). The region-based study and researchers highlighted the case of Aguadilla where the surge of STRs limited access to affordable housing. Another report by the Center for a New Economy examined the number of STR listings as a percentage of total housing units to determine how these rentals could be impacting the housing supply. The quantitative analysis found that while controlling for other variables, a 10% increase in short-term rental density led to a 7% increase in the median rent and a 23% increase in median housing unit prices the following year (Bartolomei et al., 2022). Importantly, these findings establish a causal and statistically significant relationship between STR expansion and the shortage of affordable housing on the island.
With these results in mind, it is crucial to consider how the Puerto Rican government might go about regulating the industry so as to mitigate the negative effects it can have on housing options for locals. While there have been attempts to control STRs at the municipal level, the statal regulation is generally lacking. The only regulatory policy in place is a 7% room occupancy tax which (1) does not address housing market concerns, and (2) goes directly to the Puerto Rico Tourism Company (Bartolomei et al., 2022). This is precisely why in November of last year, a bill was introduced by the local government to limit the use of STR properties in residential areas down to 30 percent. Hosts that exceed that cap would have to apply for a permit to change their status from residential to commercial use. Beyond Puerto Rico however, cities in the US, Europe, and Asia are also faced with the new challenge of determining how to best regulate the short-term rental industry while still reaping its economic benefits. Fortunately, this presents the opportunity for more global solutions to an international problem.
Choudhury, M. (2022, July 27). Short-term rentals: the challenges and the need to overcome them. The Weekly Journal. https://www.theweeklyjournal.com/business/short-term-rentals-the-challenges-and-the-need-to-overcome-them/article_4bf7fe38-0dd9-11ed-9512-034be67db580.html.
Graulau, B. (2021, December 28). Are Puerto Ricans Being Pushed Out? [Video]. YouTube. https://www.youtube.com/watch?v=YGXtWpCOiC8.
Hernández, J. (2022, November 9). The Evolution of the Short-Term Rental. The Weekly Journal. https://www.theweeklyjournal.com/business/the-evolution-of-the-short-term-rental/article_77d849e2-5ff3-11ed-8708-5faa5bf99380.html.
Hinojosa, J. & Meléndez, E. (2018). The Housing Crisis in Puerto Rico and the Impact of Hurricane Maria. Centro: Center for Puerto Rican Studies. https://centropr-archive.hunter.cuny.edu/sites/default/files/data_briefs/HousingPuertoRico.pdf.
Lamba Nieves, D. & Santiago Bartolomei, R. (2022, June 29). Puerto Rico’s Housing Situation Five Years After Hurricane María. Center for a New Economy. https://grupocne.org/2022/06/29/puerto-ricos-housing-situation-five-years-after-hurricane-maria/#:~:text=SHARE&text=The%20combined%20impacts%20of%20hurricanes,housing%20units%20on%20the%20island.
Oxford Economics. (2022). Impacto económico de Airbnb en Puerto Rico. https://sincomillas.com/wp-content/uploads/2022/07/Airbnb-PUERTO-RICO-SPANISH-V6-small.pdf.
Santiago Bartolomei, R., Lamba Nieves, D., Figueroa Grillasca, E., & Santiago Venegas, Y. (2022). The Impact of Short-Term Rentals in Puerto Rico: 2014-2020. Center for a New Economy. https://grupocne.org/wp-content/uploads/2022/12/2022.12.12-The-Impact-of-Short-Term-Rentals-in-Puerto-Rico-2014-2020.pdf.
Schaal, D. (2023, January 25). Airbnb Warns a Puerto Rico Bill Would Essentially Ban Short-Term Rentals. Skift. https://skift.com/blog/airbnb-warns-a-puerto-rico-bill-would-essentially-ban-short-term-rentals/.
Suárez, D., Rodriguez Velazquez, V., & Sosa Pascual, O. (2022, December 19). A nightmare for Puerto Ricans to find a home, while others accumulate properties. Centro de Periodismo Investigativo. https://periodismoinvestigativo.com/2022/12/a-nightmare-for-puerto-ricans-to-find-a-home-while-others-accumulate-properties/#:~:text=The%20government%20estimates%20that%20the,Puerto%20Rico%20is%2020%2C000%20units.