Puerto Rico faces severe housing shortage amid regulatory, cost challenges
Among the issues discussed was the high cost of development, 30% of which is attributed to government-related expenses.
Puerto Rico’s housing market is grappling with a significant shortage of affordable homes, a challenge that experts say will intensify unless critical reforms are implemented.
At the recent ICON Summit, a gathering of 40 industry leaders from sectors such as housing, energy and tourism, the spotlight was placed on the dire lack of new housing developments in the island.
Vanessa de Mari-Monserrate, executive vice president of Interlink, outlined the growing crisis during her participation in the panel entitled “The State of Housing in Puerto Rico: Affordable Housing Myths, Realities and Opportunities.”
She noted that in 2024, only 600 new housing units are expected to be built — far short of the 3,000 units needed annually to meet existing demand. This imbalance between supply and demand is driving soaring prices, making it increasingly difficult for working families to afford homes.
One of the most pressing issues discussed at the summit was the high cost of development, 30% of which is attributed to government-related expenses such as construction fees, permits and infrastructure costs.
De Mari argued that reducing these fees could lower sales prices and make homes more accessible for Puerto Rican families.
“The lack of housing inventory is one of the biggest challenges we face,” she said, emphasizing that government regulations have made it increasingly difficult to develop new housing. Currently, only 14% of Puerto Rico’s land is available for development, with the rest reserved for agricultural use or protected as nature reserves. This limited availability further complicates efforts to increase housing stock.
To address the housing shortage, De Mari mentioned Act 182, recently signed by Gov. Pedro Pierluisi. The law provides incentives for developing abandoned or underutilized properties in urban centers, targeting both the rental and sales markets.
This initiative is seen as a potential solution to revitalize urban areas and create more formal rental markets, which could alleviate some of the pressure caused by a lack of affordable housing.
“The development of these areas could help promote nonsubsidized rental options, which are severely lacking in Puerto Rico,” De Mari added.
Rethinking housing development
Francis Peréz, program manager of Foundation for Puerto Rico, argued that the current model of suburban sprawl, inspired by the U.S., has contributed to the housing crisis. He emphasized the need to focus on high-density, mixed-income housing developments that are less reliant on car ownership and more concentrated in urban areas.
Pérez noted that such an approach could stimulate economic development and make housing more accessible to the middle and lower classes.
“We need to discourage the development of single-family homes and focus on multifamily housing options that can accommodate more people at lower costs,” Pérez said.
Agustín Rojo, president of the Puerto Rico Builders Association, pointed out that Puerto Rico lost a significant portion of its skilled labor force after Hurricane María, including electricians, plumbers and construction workers. This has further slowed housing development and driven up costs.
“This fuels high housing costs on the island, which are compounded by inflation, high material costs and a lack of inventory, which make homes more expensive,” he said.
Meanwhile, the proliferation of short-term rentals, particularly through platforms like Airbnb, was also cited as a factor contributing to the housing shortage.
In areas like the island-municipality of Culebra, for example, more homes are being converted into short-term rentals, reducing the availability of housing for local workers. This trend has led to an increase in rent prices, further exacerbating the affordability crisis.
“There’s no housing for employees who go to Culebra to work. Before, they paid $500 in rent, and now those properties have changed to Airbnb [leaving] no inventory,” the panelists said.
The panelists concluded that significant policy changes and efforts are needed to reduce development costs, “as the housing crisis in Puerto Rico is expected to worsen, limiting access to affordable homes and stifling the island’s economic recovery.”
