Short-term rental boom driving up rents, worsening affordable housing shortage

Culebra Mayor Edilberto Romero Llovet

By The Star Staff

While Airbnb rentals are a popular investment in Puerto Rico, the industry is tightly controlled by a few short-term rental firms, one of which belongs to the governor’s son, a situation that has resulted in increasing rental and property prices that are displacing the middle class and the poor.

The Airbnb effect is very prevalent in Culebra, an 11-square-mile offshore island municipality with barely 1,300 residents. Mayor Edilberto Romero Llovet told the STAR there are at least 330 Airbnb properties, and he believes the number is higher.

Not all of the properties are paying a room tax as they operate underground and not all are paying patentes, or so-called city taxes, nor are they paying for trash collection services.

“Right now we have a surplus in our municipality, but we are missing revenues,” he said.

There are other social problems at play, however.

“There are no properties for long-term rental,” the mayor said, which is preventing the island town from attracting workers as they are forced to take the ferry each day from the main island to work in Culebra.

Romero Llovet said he has about 15 job positions in the municipality that he cannot fill because of the housing situation.

The option of buying a property in Culebra to work and live there is also out of the question because “prices are super high,” the mayor said. Property prices range from $400,000 to above the million-dollar figure. The situation is similar in the somewhat larger island municipality of Vieques, where there are 600 properties registered for short-term rental.

Romero Llovet is planning to take action, but he is waiting for the results of an ordinance approved in Dorado to deal with the high number of short-term rentals, and which he plans to imitate. Dorado passed an ordinance over a year ago establishing requirements for the operations of short-term rentals which the mayor said have disrupted quality of life. Airbnb operators must be the owners of the properties rented out and have the endorsement or resident associations when required. He also established license fees that start at $1,000.

Currently, San Juan is the city with the most short-term rentals at 3,800, according to data obtained by Norberto Quiñones Vilches, a data analyst working in the mainland U.S. Most of these properties are in coastal areas or tourism areas such as Old San Juan. Carolina has 1,842 short-term rentals, most of which are in Isla Verde. Naguabo, another coastal town, has 74 properties but Quiñones Vilches said it is growing. Humacao, meanwhile, has 400 units, Fajardo 700 units, Luquillo 800 and Río Grande 1,000.

But there is still more downside to the short-term rental boom. Studies in Puerto Rico and in other countries have shown that the short-term rental industry has caused a housing shortage. Thus, rent prices are skyrocketing across major cities.

The Río Piedras urban center of San Juan, near the University of Puerto Rico, has 30 units and their effects were felt Sunday when residents in a building on Ponce de León Avenue decried the fact that their rent was going up to $1,000 a month. Individuals renting properties in Old San Juan have seen their rent prices double from one day to the next. Living in Old San Juan can cost at least $3,000 in monthly rent.

Quiñones Vilches told the STAR that he had a friend who, while waiting for a bank to approve a loan to purchase a home, lost the property when another individual offered to buy the property in cash from the homeowners.

A Center for a New Economy (CNE) study a few years ago of Airbnb rentals in Puerto Rico found that between 2014 and 2020, nearly 11,500 hosts listed nearly 25,000 rental properties through Airbnb, representing nearly 6% of Puerto Rico’s total rental housing stock.

There is also a trend toward property hoarding by individual hosts: the top 10 Airbnb hosts who reported the highest levels of income have hoarded 611 properties amongst themselves, for a total of nearly $18 million in revenue in a year.

Those businesses are promoted by the Tourism Company.

Anthony Pierluisi, one of Gov. Pedro Pierluisi Urrutia’s children, controls much of the short-term property rental business in San Juan where his firm West Indies Vacation Rentals has 88 properties, Quiñones Vilches noted.

Other firms that have taken over the short-term rental market in San Juan are: The Dream Catcher with 36, Dream Inn PR and La Esmeralda PR with 32 each, Qastle with 27 and Mok Properties with 25.

In Río Grande, a firm called Ocean Realty has the most properties for short-term rental with 16 and in Fajardo, a firm called Casa Caribe has the most properties for short-term rental at 20.

Quiñones Vilches said it is time for the island government to place limitations by limiting short-term rentals to tourism areas and preventing limited liability companies from buying properties in residential areas for short-term rentals.

Most of these companies buying homes for short-term rentals are owned by private investors benefiting from Act 60, formerly known as Act 22. However, legislation that would limit the use of short-term rentals in residential areas to 30% of the properties remains stalled in the Legislature.

House Bill 1557, which was introduced in November, would require hosts who seek to use more than 30 percent of their space for short-term rentals to apply for a permit to change the designated use from residential to commercial.

The legislation is geared to reduce short-term rentals’ disruptive impact on neighborhoods, ease affordable housing shortages and curb high rents.