Why are Puerto Ricans being displaced?
Short-term rentals aren’t the only cause behind the housing crisis in Puerto Rico
Cover photo by Farrique Pesquera
The fight for adequate housing in Puerto Rico is undeniable. Public discussion about this topic has mostly focused on the possibility of gentrification, stemming from the recent spike in short-term rental units. However, studies by organizations, such as those made by the Center for a New Economy (CNE) and Ayuda Legal Puerto Rico (ALPR) also point to other causes without diminishing the impact of these guesthouses.
Displacement and the absence of adequate housing, in Puerto Rico, is a problem with many layers, including high prices and low supply; mortgage foreclosures and evictions; housing units that haven’t been repaired yet after being impacted by hurricane Maria and by earthquakes; and climate change. Read on to find out what’s contributing to the problem and who’s responsible.
1. Fewer affordable housing units
Finding adequate housing at an affordable price becomes harder by the day. According to Habitat Puerto Rico, an organization that handles affordable housing and training programs, there needs to be more than 70,000 rental units, at an affordable price, to provide for the need of adequate housing in our archipelago.
Short-term rentals that have monthly rents for under $800 are mostly for student housing —within the metro area or towns with a high college student population, such as Mayagüez and Ponce— or studios located within houses, according to data compiled by the firm Inteligencia Económica. Around November of 2022, the average monthly price of rental units in Puerto Rico reached $2,990. On the other hand, the median was calculated to be $1,600 monthly; in other words, half of rental units were either above or below this price, according to this firm.
Near April of 2023, the cost of new housing had gone up by 49%, in comparison to the previous year —the highest increase in 9 months, as reported by Sin Comillas. According to this news outlet, the increase is due to the sale of luxury properties. Residents needing to rent out a home —in this case, a two-room apartment, at a fair market price (calculated to be $503 monthly)— should earn a minimum of $9.66 per hour, according to the report Out of Reach, prepared by the National Low Income Housing Coalition.
A fair market price is calculated based on homes that have a value under the 40% of typical rental units —recently occupied and up to decent living standards— within the local market, according to the United States Department of Housing and Urban Development (HUD).
In other words, 60% of rental units are either equal or higher than the estimated fair market price.
In Puerto Rico, according to Out of Reach, the local minimum wage of $8.50 per hour isn’t enough to rent out a two bedroom apartment at a fair market price —calculated at $503 monthly. Most rental units are even less affordable for those who earn the minimum wage.
If a worker maintains a full-time job —40 hours per week— earning the minimum wage of $8.50, their income will only suffice to rent out a one bedroom apartment at a “fair market price”, according to the report.
2. More families are being evicted from their homes
Mortgage foreclosures and evictions due to lack of payment are some of the most common ways of removing families from their homes. These legal strategies, implemented by financial institutions and tenants, can often become unfair and be used against residents. This was one of the main issues discussed by lawyers Ariadna Godreau, Jynamarie Kuilan y Verónica González, from Ayuda Legal Puerto Rico, at a workshop that they offered for news outlets under the title They’re taking away my home! Evictions, displacement and public housing.
From 2012 to September of 2022, local banks in Puerto Rico foreclosed 40,009 mortgages. A mortgage foreclosure is when a lender recovers a property —via lawsuit— because the owner stopped making payments, according to the Consumer Financial Protection Bureau. Banco Popular of Puerto Rico (BPPR) takes the lead in most residential unit foreclosures on the archipelago, according to a report published by the Office of the Commissioner of Financial Institutions (OCIF, in Spanish).
Since 2021, an increase in repossessed properties and evictions due to lack of payments has been observed. A repossessed property is any property that is once again owned by a bank after an eviction due to lack of payments. Each financial institution has its own process to handle its inventory. 2021 capped off with 1,919 homes that were repossessed by financial institutions. In December of 2022, the amount of repossessed properties increased to 1,991.
Similarly, evictions due to lack of payment —when a lender or owner goes to court to expel the lodger who isn’t paying from their home— tripled between 2021 and 2022. More than half (58%) of lawsuits were filed against single women. This percentage goes up to 72% —or nearly three of every four breadwinners— when it comes to female residents of public housing, according to Godreau, lawyer and founder of ALPR.
Organizations such as ALPR have pointed out that banks and real estate corporations use repossessed home auctions for their own financial benefit. The auction process isn’t equal for all participants: the process requires deposits for participation, and most people will be competing against the resources of large corporations and real estate investors. In the end, the spikes in reselling prices limits participation from economically vulnerable groups.
For the auction company Centro Casas, 99% of the properties that they auction were repossessed. Due to high demand, repossessed homes are even more expensive now than those that are ready to be inhabited.
Total Repossed Real Estate Properties Inventory
3. More than 300,000 homes affected by storms, hurricanes and earthquakes since 2017
Hurricane Maria directly impacted 306,126 housing units, according to the study Vulnerability of Renters and Low-Income Households to Storm Damage: Evidence From Hurricane Maria in Puerto Rico, from the University of Pennsylvania. This investigation was prepared with data from applications submitted to the Individual Assistance Program handled by the Federal Emergency Management Agency (FEMA).
Recovery efforts on the island after these recent natural phenomena have been plagued with delays, inconsistencies and complaints. ALPR has pointed out that the slow deposit of funds, scarce oversight and the intermittent blue tarp crisis has created an inefficient recovery process.
On the other hand, around September of 2022, barely 3,502 projects had been completed —most of them for repairs, and only 22% were reconstructions— out of the 17,330 active applications handled by the Central Office for Recovery, Reconstruction and Resiliency (COR3), according to the IV Report toward Fair Recovery Efforts, published by ALPR.
4. Short-term rentals put pressure on the real estate market
If you guessed before reading this article that short-term rental units (STRU) contribute to the adequate housing crisis, you’d be correct.
According to the study The Impact of Short-Term Rentals in Puerto Rico: 2014-2020, published by the CNE, this type of living unit changes neighborhoods as a result of the increases in cost of life, a process more commonly known as gentrification. For example, this occurs when tourists begin staying in areas that were exclusively residential rather than used for tourism or commercial purposes.
Another issue is that the large proportion of houses available on digital platforms, such as AirBnB, limits housing options, given that these properties aren’t available for long-term rental or for potential homeowners looking to buy homes. On the other hand, there’s a geographic factor involved. Coastal towns and cities tend to have a higher density of short-term rental units; this has been particularly observed in the northeast coast of the archipelago.
However, CNE’s study points to another critical observation: the amount of new STRUs listed responds to specific seasons, and it’s particularly susceptible to the seasons after natural disasters. After hurricane Maria, the daily amount of listings for rental units went up by 30%. From this data, it can be inferred that disasters are a factor that allows investors to take advantage of the sudden decrease in home prices to purchase these properties and turn them into STRUs.
For those who own a single property, it also becomes a way for them to earn income during times of economic hardship.
CNE also reported that a 10% increase in the density of STRUs in Puerto Rico —measured including the percentage of all housing units on the island— has provoked an increase of an average of 7% for the median rent and an increase of 23% for the price of housing units.
The growing professionalization of the market is another relevant point in the conversation. It’s been observed that the market best suits professional hosts and those that have been commercialized. Hosts that own multiple properties represent more than two thirds of all short-term rental unit listings, and they receive almost 80% of all the earnings made.
Puerto Rico’s own governor, Pedro Pierluisi Urrutia, revealed in April that one of his sons owns almost 200 properties as vacational or short-term rental properties. Anthony Pierluisi Rojo’s corporation, West Indies Vacation rentals, is the only company with over 100 properties under its name, according to AirDNA, a specialized webpage that studies data about STRUs.
In fact, Puerto Rico leads the list of countries and territories with the largest amount of superhosts on Airbnb. The corporation gives the title of superhost to hosts with more experience and the best reviews, who have the highest odds of generating higher income.
5. Climate change: beyond rising temperatures
Displacement caused by climate change and the impact of disasters is a matter of human rights. Its effects are felt the most by people and communities in vulnerable situations, such as women, elderly people, poor people,Black people, and people with disabilities, according to the members of ALPR.
High temperatures cause more than just discomfort. Godreau, executive director of ALPR, explained that “the heat makes humidity worse in apartments.” She described, in an interview with 9 Millones, that mold “is the next big topic regarding public housing,” given that heat worsens their effects.
The increase in sea levels is yet another problem on the rise. This phenomenon can cause erosion within beaches, the loss of coastal structure and an increase in floods, according to the organization. The lawyers that form up ALPR also noted that around 245,586 homes in Puerto Rico are located in flood zones. On the other hand, climate change is leading to more droughts, stronger rains and more intense hurricanes.
However, climate change doesn’t just impact the environment. ALPR made a call for institutions to prevent and mitigate damages caused by these phenomena without the need for displacing residents or other kinds of violence.
The lawyers noted the relocation of residents should include guarantees for community participation; they also emphasized that the mitigation of damages shouldn’t be a privilege reserved for more affluent sectors. The connection between climate change and social class demonstrates the complexity surrounding the conversation about displacement.
One of the prerequisites for adequate housing is habitability, defined by the United Nations as the quality of guaranteeing physical safety and any protection against risks toward health and structural dangers. Amongst these risks, there’s rain, humidity, wind, cold and heat. In this way, ignoring the effects of climate change and the discussion about possible solutions is a threat to the right of adequate housing.
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