Puerto Rico sees push for tigher regulations on short-term housing rentals, report says

• Activists are advocating for stricter regulations on short-term rentals in Puerto Rico due to rising housing costs.
• While short-term rentals contribute to job creation, tourism and transportation options, they also lead to evictions and higher living costs.
• Proposed measures include establishing a public registry of short-term rentals, classifying them as businesses and raising the island’s room tax.

Activists want stricter regulations of short-term rentals in Puerto Rico as the U.S. territory sees a growing number of displaced renters and a spike in housing costs, the Hispanic Federation said in a report Wednesday.

The number of units operating as short-term rentals in Puerto Rico jumped to more than 25,000 in 2022 from about 1,000 in 2014, the report commissioned by the federation said.

It found that while short-term rentals create jobs, attract visitors and lead to more transportation options, renters have faced evictions, the cost of goods have increased amid an economic crisis and some ecological areas have been destroyed during new construction.

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The report calls for creating a public registry of short-term rentals, classifying them as a business and increasing the island’s room tax from 7% to up to 11% and using the additional revenue to develop affordable housing.

A wooden Puerto Rican flag is displayed on the dock of the Condado lagoon in San Juan, Puerto Rico, on Sept. 30, 2021. Activists are seeking stricter regulations of short-term rentals in Puerto Rico as the U.S. territory sees a growing number of displaced renters and a spike in housing costs. (AP Photo/Carlos Giusti, File)

"This has gotten to a point where the impacts are really palpable in Puerto Rico," Charlotte Gossett Navarro, the foundation’s Puerto Rico chief director, said in an interview.

A key factor in the increase of short-term rentals was Hurricane Maria, which pummeled the island in September 2017. Many people migrated to the U.S. mainland afterward, while scores of new investors came to the island to buy homes and properties.

That led to a reduction in housing availability and affordability, Gossett said, adding that other factors including the pandemic also are to blame.

Now, between 100 to 400 new short-term rentals are reported a month in Puerto Rico, with apartments representing 60% of properties available for that purpose.

Dulce del Río-Pineda, who has lived 40 years on the island of Culebra just east of Puerto Rico, said she noticed a big change in the housing market in the past seven years with the influx of short-term rentals.

"It's an economic benefit," she said. "At the same time, our young people especially find themselves without any hope of being able to buy their own home. It's a way of making our community disappear."

The 64-year-old former special education teacher who now helps to run a local nonprofit said social inequality also has become more dramatic. Some homes on Culebra, a popular tourist destination, now cost $4 million to $8 million.

A recent study by the non-partisan Center for a New Economy and the Graduate School of Planning of the University of Puerto Rico found that a 10% rise in the number of short-term rentals in a community increases housing rental costs by 7% and the property value per square foot by 23%.

"With so much to offer visitors, tourism will always be an important part of Puerto Rico’s economy," said Frankie Miranda, the Hispanic Federation's CEO and president. "However, it cannot come at the expense of Puerto Rico’s residents and communities."

Activists are calling for rent-control policies; restoring abandoned properties for long-term rentals; designating six or more rental units as a small inn; and designating areas where short-term rentals can operate to protect ecological and agricultural lands.

Various bills have proposed how short-term rentals should be operated. One still under consideration would, among other things, award regulation and oversight of such properties to municipalities.

"The good thing is that the conversation is already happening in the government," Gossett said. "There’s an awareness that something needs to change."

But the new report noted that the bills do not address the impact of short-term rentals on housing, including displacement and gentrification.

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Gossett noted that the study found a consensus that short-term rentals can be important for the island, and said the foundation is not seeking a ban on them.

A day before the report was released, Airbnb issued a statement saying it supports the "inclusive regulation" of short-term rentals, which will have to be registered by early June if they’re operating in the capital of San Juan.

Airbnb, which has generated more than $70 million in room tax revenues for Puerto Rico and is behind the majority of the increase in short-term rentals, also had backed a bill that called for allocating 5% of room tax revenues to municipalities. Legislators voted against it in a move that some blamed on a "power game" among lawmakers.

Meanwhile, another bill is pending before legislators that would create a regulatory framework for short-term rentals at a national level. Given the lack of such a framework, the room tax is collected from Airbnb and other companies under an agreement with Puerto Rico's Tourism Company.