Stateside publications take note of PR’s gentrification problem
By The Star Staff
A New York real estate publication has highlighted the problem of increasing gentrification in Puerto Rico, which has driven up local real estate prices.
Nearly a decade ago Puerto Rico enacted Act 22 of 2012, the Individual Investors Act, a law that seeks to attract new residents to Puerto Rico by providing a total exemption from Puerto Rico income taxes on all passive income realized or accrued after such individuals become bona fide residents of the commonwealth. The law’s purpose is that the relocation of the investors to Puerto Rico results in new investments in real estate, services and other consumption products, and in capital injections into the Puerto Rico banking sector, all of which would accelerate the economy of the island.
The government also enacted Act 20 of 2012, also known as the Export Services Act, to create a world-class service center by providing tax credits and tax exemptions to businesses engaged in certain eligible activities in Puerto Rico.
The tax breaks are attracting individuals like YouTube phenom Logan Paul, who moved into a $13 million mansion in Puerto Rico, and cryptocurrency billionaire Brock Pierce, who bought an $18 million hotel in Vieques. “Well-heeled investors offer locals blank checks and ask them to fill in what they think their homes are worth,” the Real Deal noted.
According to the publication, however, the investors have brought a wave of gentrification as property prices are rising, making it difficult to impossible for locals to buy properties.
Besides shimmering ocean views, the investors are also chasing tax breaks. New arrivals, many of them finance and tech investors who have applied for the tax breaks, are driving up rents and home prices, the Real Deal noted.
“The gentrification has carved beachheads around a U.S. territory slammed in recent years by natural disaster, broken infrastructure, bankruptcy and an exodus of 12 percent of its population,” the publication stated.
It notes the large population of mainland residents that have moved to the west coast town of Rincón. Some are cryptocurrency traders who hold weekly happy hours at a seaside bar. A barbecue truck that opened in August accepts Bitcoin and other cyber currencies for its mainland-style chicken.
“Property flippers have also swooped in. Some have turned homes into short-term vacation rentals, creating entire Airbnb corridors and putting homes out of reach to locals,” The New York Times reported. “In 2017, a two-bedroom condo listed for an average of $290,000. Now, the same unit could ask $420,000. The average income in Rincón is around $19,000 a year.”
“It feels like Hurricane Maria placed a ‘For Sale’ sign on the island,” said Gloria Cuevas Viera, a Rincón resident who is helping to lead the fight against gentrification, in the Times story.
Renters driven out by skyrocketing prices along the coast can move inland to cheaper towns — but then face higher costs for gas, tolls and commuting, Heriberto Martínez Otero, chairman of the Ways and Means Committee in the Puerto Rico House of Representatives and an economics professor at the University of Puerto Rico, told the publication.
Gov. Pedro Pierluisi Urrutia has praised the many investors buying up luxury homes and the influx to the island real estate market.