Puerto Rico Home Prices Surge Amid Tax Incentives and Tourism Boom

Home prices in Puerto Rico are skyrocketing, reflecting a strengthening local economy but also squeezing affordability for residents ycharts.com. Overall home values jumped 11.6% year-over-year in Q1 2025, far outpacing the annual price growth of any U.S. state ycharts.com. This surge followed a 22% price spike in Q4 2024, the island’s largest gain since the Federal Housing Finance Agency (FHFA) began tracking in 1995 globalpropertyguide.com. Multiple factors are driving this housing boom, ranging from generous tax incentives luring high-net-worth buyers to a post-hurricane economic revival and a tourism-fueled rental frenzy. However, high construction costs have limited new home building – especially affordable housing – leaving many local families priced out of the market.

Key drivers of Puerto Rico’s housing boom include:

• Act 60 tax incentives attracting wealthy new residents and investors (more on this below).

• Rebuilding and investment after 2017’s Hurricanes Maria and Irma, which strengthened infrastructure and the economy.

• Tourism resurgence and short-term rentals (Airbnb, Vrbo, etc.) creating huge demand for properties.

• High construction costs that deter affordable housing projects, constraining supply and pushing prices higher for existing homes.

Puerto Rico’s Price Growth Outpaces the Mainland

Despite the recent jump, Puerto Rico’s home prices remain relatively affordable compared to the mainland U.S. – a major reason outside buyers and investors have flocked to the island. In the first quarter of 2025, the median home sale price in Puerto Rico was $290,000, up 32% from a year earlier, but still well below the U.S. median of about $398,000 for that period. (Puerto Rico is a self-governing U.S. territory, so Americans can move freely to the island without a visa or passport.)

The huge price gains mark a sharp reversal for Puerto Rico’s housing market. For more than a decade after the 2008 financial crisis, home values stagnated or fell. The island’s economy was battered by a prolonged recession and a 2017 government debt crisis that led to a bankruptcy filing. The devastation of Hurricanes Maria and Irma in 2017 further worsened the situation, damaging tens of thousands of homes and infrastructure. Mass emigration during this period caused Puerto Rico’s population to shrink by about 17% (2004–2018), leaving many vacant homes and soft prices due to a lack of buyers globalpropertyguide.com.

Since 2019, however, Puerto Rico’s population decline has leveled off. Net outmigration slowed dramatically during the COVID-19 pandemic – far fewer people left the island, and the number of people moving to Puerto Rico actually increased census.gov. The job market has also improved significantly. Puerto Rico’s unemployment rate fell below 6% in 2024 (for the first time in at least 50 years) and was down to 5.3% as of March 2025, compared to 5.7% a year earlier globalpropertyguide.com. These better job prospects at home, combined with relatively cheaper real estate, have likely drawn some native Puerto Ricans back from the mainland in search of opportunity and affordable homes.

Act 60: Tax Breaks Lure Wealthy Newcomers

Among the newcomers driving demand are wealthy individuals drawn by Puerto Rico’s lucrative tax incentives, known as Act 60 (formerly Acts 20/22). This program offers extraordinary tax breaks to new bona fide residents of Puerto Rico who meet certain conditions tax.thomsonreuters.com. Those conditions include purchasing a home on the island within 2 years, living in Puerto Rico for at least 6 months per year, and donating at least $10,000 annually to a local nonprofit tax.thomsonreuters.com. In return, Act 60 grantees pay zero local taxes on their capital gains, dividends, and other investment income, and because of Puerto Rico’s territorial status, their Puerto Rico-sourced income is also exempt from U.S. federal taxes tax.thomsonreuters.com. Essentially, Puerto Rico becomes a tax haven for these individuals, offering benefits “Americans could not obtain anywhere else in the world,” as U.S. lawmakers have noted democrats-naturalresources.house.govdemocrats-naturalresources.house.gov.

These tax migrants – which include cryptocurrency investors, hedge fund managers, and remote tech entrepreneurs – have been snapping up real estate, from luxury estates to suburban houses, adding to the surge in prices. Critics argue that Act 60 is distorting Puerto Rico’s housing market and letting the ultra-wealthy evade taxes with little benefit to local communities. A group of U.S. House Democrats went so far as to introduce a resolution (the UPROAR Act) in late 2024 targeting Puerto Rico’s Act 22/60. “[T]he influx of wealthy Americans seeking tax breaks has oversaturated the housing market, driving up housing prices and reducing availability for long-term residents,” the resolution stated tax.thomsonreuters.com. It cited evidence that waves of outside investors have contributed to rent spikes and priced-out locals.

Puerto Rico’s government defends Act 60 as a tool to attract capital and new residents to the island. And it’s true that not all new arrivals are purely tax-driven transplants – many have family or business ties to Puerto Rico or are returning diaspora. Improved economic conditions and cheaper real estate (relative to places like New York, Miami, or San Francisco) are also motivating people with Puerto Rican roots to move back home. Still, the debate over Act 60 continues, with calls to reform the law to ensure it truly benefits Puerto Rico’s economy and doesn’t just create a playground for the rich.

Short-Term Rentals Boom – and Squeeze Housing Supply

Another major factor in Puerto Rico’s soaring home prices is the explosive growth of short-term rentals across the island. With its abundant beaches, historic Old San Juan, and natural beauty, Puerto Rico has become a hugely popular destination for tourists and remote workers – and many are opting to stay in private rentals listed on platforms like Airbnb and Vrbo. In less than a decade, the number of short-term rental (STR) units in Puerto Rico surged from roughly 1,000 in 2014 to over 25,000 in 2023 hispanicfederation.org. This “Airbnb boom” has effectively diverted a significant share of the island’s housing stock into the vacation market, contributing to a housing shortage and higher prices for locals.

A recent analysis by the Puerto Rico-based think tank Center for a New Economy (CNE) quantified this impact. Using statistical models, CNE found that a 10% increase in the share of housing units used as short-term rentals in a given area leads to about a 7% increase in median rent and a whopping 23% increase in median home price in the following year grupocne.org. (Notably, it barely increases housing sales volume – only about 0.1% – indicating that STRs mainly drive prices up rather than boosting overall transactions grupocne.org.) In popular tourist spots like coastal towns and certain islands (e.g. Culebra), short-term rentals now make up a huge portion of available homes, making it even tougher for local workers to find long-term housing.

Community leaders are growing concerned. “With so much to offer visitors, tourism will always be an important part of Puerto Rico’s economy,” said Frankie Miranda, president of Hispanic Federation, “however, it cannot come at the expense of Puerto Rico’s residents and communities.” apnews.com The Hispanic Federation, along with the University of Puerto Rico’s planning school, recently commissioned an independent report on short-term rentals and hosted a summit to discuss solutions. Among the recommended reforms to rein in the STR boom: creating a public registry of all short-term rentals and classifying them as businesses (with proper licenses and regulations), and raising the island’s lodging tax from 7% to around 9–11% apnews.com. By treating vacation rentals more like hotels, regulators hope to both increase government oversight and generate additional tax revenue – which could be invested in affordable housing or community development to offset the impact of short-term rentals. Puerto Rico’s legislature has begun considering bills along these lines, though as of now the 7% room tax and relatively lax oversight remain in place.

For local residents, the hope is that such measures will cool down the red-hot housing market and preserve neighborhoods from overtourism and speculation. Housing is, after all, a basic need – and the challenge facing Puerto Rico is how to balance its booming #tourism economy with the needs of its people for affordable, stable homes.

For homebuyers and investors, Puerto Rico’s dynamic real estate market offers exciting opportunities – but also new complexities. It’s more important than ever to have expert guidance when navigating this rapidly changing landscape. At INCANTO Real Estate & Relocation, we specialize in helping clients understand and succeed in Puerto Rico’s real estate market. Whether you’re looking for a Caribbean dream home or an investment property to take advantage of Act 60 and the island’s growth, our experienced team is here to guide you every step of the way. Your Property is Our Priority!

Sources: ycharts.comglobalpropertyguide.comglobalpropertyguide.comcensus.govglobalpropertyguide.comtax.thomsonreuters.comtax.thomsonreuters.comhispanicfederation.orggrupocne.orgapnews.comapnews.com

#PuertoRico #RealEstate #Act60 #HousingMarket #ShortTermRentals #AffordableHousing