Puerto Rico Short-Term Rental Growth Exacerbates Housing Crisis: Report

A new study on the impact of short-term rentals in Puerto Rico, where the proliferation of Airbnb listings played an outsized role in its tourism recovery following Hurricane Maria, found that a 10 percent increase in short-term rental density in relation to the total number of housing units, led to a 7 percent increase in median rents and a 23 percent jump in housing unit prices.

The Center for a New Economy study used AirDNA and other data to assess short-term rental trends and their impact in Puerto Rico from 2014 to 2020. The backdrop is that Puerto Rico faces a housing crisis that includes a lack of affordable housing, as well as increasing rents, foreclosures and evictions as short-term rentals have proliferated, according to the study. The Center for a New Economy stated that hurricanes and earthquakes damaged more than 300,000 apartments and homes in Puerto Rico since 2017, exacerbating the crisis.

“The large proportion of entire homes listed on short-term rental platforms signals that there are a significant number of housing units that are outside of the traditional housing market and thus unavailable for long-term rental clients,” the report found. “This is particularly worrisome in Puerto Rico given rising housing costs and the limited number of units available in certain submarkets.”

The Puerto Rico government points out that the vast majority of hosts in the territory are locals, and a 2022 Oxford Economics study commissioned by Airbnb noted that 92 percent of hosts are “island-based.”

But the Center for a New Economy study found that people or entities with multiple listings accounted for two-thirds of overall listings in Puerto Rico, and commanded 80 percent of the $729 million in short-term rental revenue generated on the island from 2014 to 2020.

Single- Versus Multiple-Listing Hosts in Puerto Rico 2014-2020

“Contrary to the popular narratives surrounding short-term rentals, particularly the idea that these digital platforms mainly provide economic development opportunities for small property owners who’d like to generate a new source of additional income by subletting their underused units, this housing market segment is becoming increasingly concentrated, professionalized, and commercialized in Puerto Rico,” the study stated. “Single-listing hosts have increasingly outnumbered multiple-listing hosts since 2016, but it is the latter group who have accumulated more than two thirds of listings and almost 80 percent of accumulated revenue. As the data clearly demonstrates, the short-term rental market has tilted heavily towards professional or commercial hosts with multiple listings under their name.”

The study, which noted that the proliferation of short-term rentals contributed to neighborhood gentrification, called for more robust regulation of short-term rentals on the island. Currently, according to the report, the island has very limited short-term rental regulation. The major element of such regulation is that the Puerto Rico Tourism Co., which oversees domestic tourism matters, collects a 7 percent room occupancy tax. That’s geared to level the playing field with the hotel industry.

The earlier Airbnb-commissioned study from Oxford Economics highlighted how Airbnb guests staying in Puerto Rico in 2021 boosted gross domestic product and jobs.

“The $1.7 billion of spending from guests using Airbnb in 2021 directly supported $872.4 million of GDP, 24,000 jobs in Puerto Rico, generating $460.4 million in wages, salaries and other labor income across a number of sectors,” the Oxford Economics study found.

Adam Sacks, Tourism Economics president, said via email that he doesn’t see a contradiction between his company’s report and the housing impact study from the Center for a New Economy.

“Short-term rentals have been a huge part of the tourism economy’s recovery, having been battered by successive waves of crises over the past decade,” Sacks said. “The economic benefits are significant and have played a big role in the rebound after Hurricane Maria and then Covid-19.”

Sacks said short-term rentals “played a huge part of the island’s tourism recovery” given that before Hurricane Maria accommodations inventory was made up of around 15,000 hotel rooms and some 1,000 rental units, and that grew post-Maria to roughly 25,000-26,000 rooms and units together.

“That said, the regulation of short-term rentals hasn’t caught up and it is impacting the housing situation in specific areas,” Sacks said. “At the same time, other factors have also distorted the housing market with mainland residents finding a tax haven in Puerto Rico under Act 22.”

As shown in the following chart, the number of Airbnb listings and hosts in Puerto Rico from 2014-2020 dwarfed Vrbo’s, which the Center for a New Economy referred to as HomeAway (the predecessor company).

Airbnb and Vrbo (HomeAway) Listings in Puerto Rico 2014-2020

Asked about the Center for a New Economy study tying short-term rentals to intensifying the housing crisis in Puerto Rico, an Airbnb spokesperson said the company wants to work with local governments on housing solutions.

“Home sharing has been an important part of the fabric of Puerto Rico for decades, enabling the region to welcome visitors whose spending supports local businesses and creates economic opportunity for local residents,” the Airbnb spokesperson said. “The typical Airbnb host in Puerto Rico shares just one home and total listings represent less than one percent of the island’s housing stock. Most experts recognize the need to prioritize building new housing is an issue in communities large and small and Airbnb wants to be a good partner and work with local officials on efforts to help support housing solutions.”

Expedia Group, which owns Vrbo, said in a statement that the new study can contribute to discussions about tourism regulation on the island.

“Fair and effective vacation rental policies are rooted in open dialogue, reliable data, and proven solutions,” Expedia Group stated. “Expedia Group welcomes this new research as an input to discussions on how Puerto Rico can regulate tourism in a way that addresses important challenges and promotes a healthy travel economy.”