In the commonwealth of Puerto Rico, still unsettled after a protest movement and still recovering from 2017’s record-setting Hurricane Maria, the real estate market has started showing signs of momentum. Numerous studies and data points suggest that Puerto Rico’s property market is bouncing back—in some regions, and for some people.
The Federal Housing Finance Agency reported that the growth in home sale prices jumped 14 percent in the first half of 2019, compared to just 1.35 percent during the same period last year. Estudios Técnicos, a Puerto Rican consulting firm, found that new home sales surged 78 percent in 2018, a figure that doesn’t just represent rebuilding after the storm. Zillow’s recent analysis of the island’s overall market, as well as conditions in San Juan, the capital, find that the “recent rise in prices aligns with the recent drop in price cuts, a sign of market hotness.” Listing prices in San Juan have jumped nearly 23 percent year over year.
The island is “a new phoenix rising,” says Rich Holman, founder and director of Institutional and Residential Sales at Far International, and could become the next Medellin, the Colombian city renowned for using progressive urbanism to rebuild and redefine itself after years of crime and violence precipitated by the drug wars.
Real estate developers see potential in this growth and price appreciation. Graham Castillo of Estudios Técnicos says that future investors should look to build mixed-use developments like Ciudadela, a multi-use redevelopment of San Juan’s Santurce neighborhood; smaller housing units for aging seniors; and oceanfront luxury properties. New government tax incentives and housing stimulus programs, as well as the potential of distressed and foreclosed properties, provide the opportunity to find bargains.
But any gains have been disproportionately spread across the island, reinforcing many residents’ anger about inequality in the wake of the hurricane. Many regions still suffer from storm damage—FEMA found the storm damaged 357,492 homes, 23 percent of the island’s housing stock—and the mass exodus post-Maria of 220,000 to 255,000 people weighs down the island’s economy.
Tourism and industrial growth on the west coast
According to Marcos Aviles, a real estate broker with West Connection Realty in the coastal city of Aguadilla, while the island has faced “grave difficulties,” the western regions have seen lots of growth over the last two years. In addition to being a center of tourism, especially in Rincon, Isabela, and Aguadilla, there have been significant expansions by major employers in the area, including Lufthansa, Honeywell, and Hewlett-Packard.
Investors have also played a key role in the shifting market, tempted by low prices that resulted from a decades-long recession. Average home prices on the island dropped 9.6 percent in the first half of 2017, before the hurricane made landfall, and a report by Jennifer Hinojosa and Edwin Meléndez of Hunter College found that between 2005 and 2016, Puerto Rico lost 45,880 households but added 115,197 housing units, severely disrupting supply and demand.
“In terms of both marketing and lifestyle, the west area has always behaved rather differently,” Aviles says.
An analysis by real estate website Point 2 Homes found significant discrepancies in the island’s residential real estate market. Over the last year, 15 of 20 markets saw year-over-year increases, while four markets continued to fall after years of price drops. Of those areas with increases, the upscale city of Dorado saw a 66 percent jump over the last year, and four cities on the west and southern coasts—Ponce, Mayaguez, Rincon, and Isabela—have seen 2019’s average home asking prices surpass pre-hurricane levels.
Average Home Prices in Puerto Rico
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Aviles says that he knows of more than a dozen developers working on the west coast focused on new housing and commercial projects meant to appeal to an influx of workers, tourists, and retirees.
That tourist influx has also brought growth in Airbnb bookings. So far this year, San Juan has seen a 400 percent increase in bookings over 2018, and an industry report by the island’s tourism council found that short-term rentals have increased their share of the lodging industry from 15 percent pre-Maria to 26 percent this year.
A very uneven recovery
For many Puerto Ricans, this growth isn’t trickling down. During a recent people’s assembly in San Juan, in the aftermath of the ousting of the island’s governor, Jennifer Mota Castillo, 33, said her fellow citizens “want another Puerto Rico.” More than 40 percent of the island’s residents live below the poverty line, and household income is roughly $18,000 a year, less than half that of Mississippi. The power grid, which failed and led to lengthy blackouts after Hurricane Maria, has not yet been fully repaired.
Many fear new zoning, development, and growth will push out low-income Puerto Ricans. For instance, on Vieques Island, which once was home to a U.S Navy base, activists have said that the rise of Airbnb activity has led to rising prices and displacement. Reporters Martha Bayne and Isabel Dieppa found that the number of entire-home-rental Airbnb options on the island jumped from 95 in October of 2014 to 459 in March of 2019. This shift led activist Myrna Veda Pagan Gómez, testifying in front of the United Nations Special Committee on Decolonization in July, to say Vieques is experiencing a “tsunami of gentrification.”
Real estate prices have dropped in other parts of Puerto Rico, especially the more mountainous central areas where recovery and infrastructure repair have been slow. IN addition, Cabo Rojo, Aguada, Luquillo, and Guaynabo have seen home prices drop between 5 and 14 percent.
While beachfront property may be selling to investors who hope to rent it to tourists, Puerto Rico’s Public Housing Authority is in the midst of plans to evict residents and replace aging public housing with privately owned, mixed-use developments. According to Hunter College’s Hinojosa and Meléndez, the commonwealth could instead create a housing program that converted all the vacant units into affordable housing to accommodate the families that lost their homes.
“The expected flow of federal assistance to reconstruct the island offers a unique opportunity to transfer vacant housing units to social purpose utilization,” they wrote.
Puerto Rico has also been slow to receive promised redevelopment funds from the federal government, which has hampered many community-led efforts to rethink housing on the island.
Known as Community Development Block Grant-Disaster Recovery (CDBG-DR) funds, this form of post-disaster assistance for the island, administered by HUD, has been delayed after being appropriated by Congress. The next wave of such redevelopment money, $1.5 billion, comes attached to updated FEMA flood maps that may require low-income Puerto Ricans to move.
At the same time, 95 percent of the island has been included in the Opportunity Zone program, which provides tax breaks to investors to build in areas deemed to be impoverished. Activists and community organizers fear this may mean more commercial and hotel development, and less focus on rebuilding the affordable housing stock many island residents need.
When FEMA first arrived post-Maria, the organization installed more than 50,000 temporary blue roofs on damaged structures around Puerto Rico. This fall, there were still roughly 30,000 blue roofs on the island. It’s a potent symbol of the uneven nature of the island’s recovery.