>>Good morning an welcome to Global Perspectives.

In our Orlando studio, I'm David Dumke.

I am joined today by Dr. Raul Santiago, who is an assistant professor in the Graduate School of Planning, the University of Puerto Rico Rio Piedras campus.

Thank you for joining us.

>>Thank you very much, David, for having me here.

>>And in the studio, we also have Dr. Fernando Rivera, who is the head of the University of Central Florida Puerto Rico Research Hub.

Thanks for being here, Fernando.

>>Thank you, David.

Thank you.

>>We want to ask Dr. Santiago question about housing in Puerto Rico.

He is an expert on housing and obviously, it's been a huge issu for Puerto Rico since Hurricane Maria hit the island in September 2017.

Dr. Santiago, tell us a little about what the housing situation i like in Puerto Rico right now.

>>Sure.

Thank you, David.

So the housing situation in Puerto Rico is somewhat of a typical situation.

I mean, of course, there's a housing crisis pretty much worldwide and across the United States, which is especially in larger cities, that tends to be supply driven.

There's a lack of o housing construction and there's being a lack of renovations and new new housing units.

And that's caused, you know larger cities in the states to have increasing rents and housing prices overall, especially as demand has increased.

But Puerto Rico is somewhat also somewhat outside of that purview, that trend, bu mostly because by any measure, we really shouldn't have a housing crisis here.

Puerto Rico has been losing population consistently for around 20 years.

Vacancy rates for well over a decade have been in double digits, even though here again, Maria caused the loss of many housing units.

When you consider habitable housing units, pretty much in the sink in the same place you were in 2010 with a reduction in population and having a higher rate of vacancy.

But housing prices have really skyrocketed after Hurricane Maria.

And of course, the hurricane doesn't, you know, itself doesn't cause the crisis because a hurricane is just water and wind.

It's not buying properties, renting properties, evicting households, anything like that.

But what it caused was a situation where housin prices really fell immediately and that provided fertile ground for different sets of investors taking advantage of that situatio and stocking up on housing units throughout the island.

And that has really driven up prices ever since.

Just to give you an idea, David, between 2018, 20 to late 2023, the Housing Price Index, which is published by the Federal Housin Finance Agency, it's a unit list measure of housing prices for single family homes.

In Puerto Rico, the housing price index increased 28% in that five year period, which is a huge increase.

And rental prices in certain parts and certain parts of coastal towns in Puerto Rico have increased between 20% to more than 100% in that same time period.

>>We're going to get back to that in a second.

Obviously, affordable housing is a is a is a real problem, not just in Puerto Rico, but throughout the United States.

I want to turn to Dr. Rivera to ask a questio about Hurricane Maria's impact.

Dr. Santiago has mentioned the housing project and you look at the statistics.

300 homes were damaged during Hurricane Maria.

But he alluded to another point about the population decreasing.

Why is the Puerto Rica population decreased over time?

>>Well, like Dr. Santiago-Bartolomei was saying, you know, one of the things that that happened, especially with housing, it didn't start with Hurricane Maria, obviously.

That was, you know the financial crisis going on.

And obviously for any economy, when you lose population and when you lose the and the population in is earning capacity.

Right.

One of the things that are happening in Puerto Rico right now is that the people that are leaving are the younger people with families in their sort of in their prime time in terms of that.

And that for economic sort of trajectories and recovery becomes sort of an issue.

And obviously now Puerto Rico is faced with a high percentage o the population that is elderly.

So that brings about some certain challenges for, you know, affordable housing, rental units, all some units that, you know, who was going to take care of those.

So we've seen some of those dynamic being put into place out here.

And obviously it's a challenge again, in terms of economic trajectories where you don't hav the population replacement that other wealthy economies might have down the line.

>>Dr.

Santiago, you just were talking about, you know, this is affordable housing in Puerto Rico.

This isn't a new problem, but obviously since the hurricane, it's quite different.

What is the government done to encourage affordable housing and are they are the policies aimed at trying to get more wealthier investors that can benefit the economy overall?

Is it so I guess I'm asking, is this by design or is this just happen because of the private sector and the market?

>>Well, it's a combinatio of all those things, I believe.

And and just to piggyback on what Fernando was saying, if you were to characterize the housing crisis, I think housing issues in Puerto Rico before Hurricane Maria, we had plummeting prices well beyond the years of the financial crisis.

Unlike the United States, wher big housing prices immediately jumped, backed up after the crisis, the financial crisis in Puert Rico, they kept plummeting down consistentl and if you were to characterize it in know some stereotype, I would say that before Hurricane Maria, this housing situation in Puerto Rico was like this.

You had an excess of market rat housing that no one was buying, which became toxic assets for a lot of banks and a huge demand for affordable housing that no one was building.

Right.

But now you have marke rate housing that is being sold above the appreciated value of the property and still a huge demand for affordable housing.

And no one just yet is still building.

And I think there are competing policies in terms of how to address this.

On the one hand, to address the the both the financial crisis and the economic crisi in Puerto Rico that resulted due to the removal of manufacturing industrial tax exemptions in 2006.

As a response, Puerto Rico looked for capital elsewhere, and so they set up a set of tax decrees for individuals, investors to reside and moving to Puerto Rico.

And those were enacted in 2012 and basically provided not only an incom tax exemption, but also capital yield and tax exemptions for this image of angels.

If they relocated to Puerto Rico.

And there was very little requirement in terms of the actual investments that they made they would it would be tied to I think for at one point they had a requirement of a of a minimum three jobs.

If I'm not mistaken, had to donate around $10,000 for a local charity.

But these are really minimal asks for very wealthy individuals.

So in 2012, they moved them, started folks started to move individual investors started to move in.

The government sort of still sees that as an important strategy in their economic developmen for the post-crisis Puerto Rico.

I would say not until 2016 those tax exemptions really started to take off.

And a lot of these investors were looking to real estate investments, not at actual more, let's say, productive investments or commercial investments or industrial investments.

They're mostly investing due to a lack of financial instruments.

They wanted to invest in real estate around 2016 that started to take off.

Now, after Hurricane Maria, when prices really plummeted immediately after due to the damages from the devastation that the hurricane left, a lot of more investors started moving in and they started buying a lot more properties, not only under the name, but also creating like different shell companies LLCs and the like.

It was structured to acquire different properties and they will mostly use these properties to for two ends, either to flip them u for higher value in the market or they would invest them to to turn those into short term rentals.

Right.

I'll get back to the short term rentals later.

And now the government of Puerto Rico, of course, you know, feels the mounting pressure for communities that are being displaced du to these dynamics and of course, the long, longstandin affordable affordability crisis.

Let me highlight just to get a sense of the actual demand for affordable units in Puerto Rico.

So Puerto Rico is the in terms just to give you an example, is the thir largest jurisdiction in the U.S. in terms of total public housing units.

But the waiting list for public housing in Puerto Rico, which has which has been closed for around ten years, you know, it's more than 30,000 people, which is around of one household per public housing unit.

Around more than half of renters in Puerto Rico had renters that paid contract rent and more than half of those renters, they tend to spend over a third of their income on rents.

And that's been a longstanding trend that it's become.

It's been worse since Hurricane Maria, but it's a long standing trend hanging around 40% of households that have mortgages spend over a third of their income on housing costs.

So, you know, this is just to give you a sense of the actual demand for affordable housing affordability in Puerto Rico, before and after Hurricane Maria.

Now the government feeling the mounting pressure on communities, raising their voices agains the dynamics of displacement and property speculation has been taking plac as part of these tax exemptions and the opportunitie provided by short term rentals.

And the devastation immediately after Hurricane Maria started to come to use reconstruction funding to rebuild some housing units, and also to provide what are called gap financing for low income housing tax credi subsidized units in Puerto Rico.

And now those really weren't like new projects or most most of the gap financing was for projects that were already underway.

And in some senses, I think what Puerto Rico is just looking for, the low hanging fruit in terms of the failed subsidized housing units that are immediately available, but it's not really looking into any more further than that.

There recently approved a set of additional tax exemptions for housing development in the historic areas in throughout Puerto Rico.

Although there is no real requirement for spending or targeting or targeting affordable housing units tied to those.

So I think that's kind of the situation here.

And I think in Puerto Rico, it's mostly tried, I guess, to - oh, one important element also is to try to expedite the permitting process, to increase housing construction overall.

The issue, of course, is tha that doesn't really translate in or would guarantee that any potential housing development is going to produce additional affordable housing units, because right now, the market due to these tax exemptions I mentioned that the individual investors, the housing market right now is really luxury driven ever since Hurricane Maria.

>>So, Fernando, when what Raul just was talking about in terms of the market, in terms of the government policies, are the policies intended to be short term?

I mean, obviously the Puert Rican government has a need for resources, but at the same time these don't seem to be serving the public.

Is that is that accurat or what can you say about that?

>>Well, I think the government is trying to attract capital, right.

Even with all the conditions out here and, you know, one of the things, you know, with the short term rentals on all those type of things, you know, I think they're trying their best out here.

How likely they're going to be long term solutions.

That remains to be seen.

Obviously we have the fiscal control board that handles sort of th economic affairs of the country.

So even the government is a little bit hamstring in the policie that they can actually implement because they have to go through another governing body of their own.

That's creating a lot of a sort of resentment in a wa that, you know, if you imagine trying to do economic policy when you have another body actually dictating what you ca or cannot do in terms of that, obviously the speed of where this policies have done for the population.

At least the perception is that they've not done enough.

The government continues to try.

But, you know, at some point people want some action and seen some results.

And, you know, obviously, we're almost seven years out after Hurricane Maria.

The United States Housing and Urban Development has given a lot of money to Puerto Rico to tr to resolve some of those things.

But we haven't seen some of the process that the people actually expect out here.

So it's a tough situation that, you know, we've read all the things that Dr. Bartolomei was saying, you know, continue to impede that progress or that immediate progress.

>>Raul, can you tell us a littl about the federal government's role in this housing program crisis, if you will?

Is it a crisis I guess is is another question.

But in this housing problem, what is the federal government's role?

What has Washington done at this and it - are they on the same page as San Juan?

>>That's a good question.

I think the federal government has been mostly focuse on the reconstruction process.

It has recognized that there' a housing issue in Puerto Rico.

I think a lot of the day being opened to different advocacy group in terms of how to address this and also at the same time recognizing that that they don't want to have a clash of heads with the, say, the state government in Puerto Rico in terms of how to address or to apply housing policies.

You know, the government of Puerto Rico has been mostly pushing, and this is due to pressure from developers for the the federal government to focus almost exclusively on increasing the HUD's income limits to determine and determining eligibility for subsidized housing in Puerto Rico.

Now, there's been somewhat of a pushback from the federal government on this, and mostly because and rightly so, the federal government points out that if you just increase the income limits without actually increasing the supply of affordable housing units what you're really going to do is crowd out the lowest income households from the subsidized housing units.

Right.

And althoug that might be important for the especially for developers involved in the low income housing tax credit subsidized units development in Puerto Rico to access finance for their projects, it might be somewhat against the largest goal of ensuring a consistent access to affordable housing affordability, affordable housing needs throughout Puerto Rico.

So, you know, I would say the federal government is being very, how I can put it, sort of mostly delegated to the state, you know, Puerto Rico's government's role to address this.

And although has, you know, as part of the reconstruction funding, but also of the bipartisan infrastructure bill and the inflation reduction and some of these things, there has been some increase in allocation of Section eight vouchers and low additional low income housing tax credits allocated for Puerto Rico.

These are very minimal.

I'm talking about, you know, a few hundred vouchers and less than 100 million or around 100 million in tax credits, which might be consuming two or three housing projects.

So, you know, the actio has been very limited, I think.

And this is I think, a reflection of broader failure of the federal government to address the affordability crisis throughout the states.

You know, at least in the in the in the actual, you know, the scale of the of the of the the actual need.

The Biden administration did issue a set of of mandates related to institutional landlords and and rent increases as a very limited for of rent stabilization policies.

Those mostly don't appl to Puerto Rico because there is the on the fear of the corporat landlord is almost nonexistent in Puerto Rico unless we're talking about the low income housing tax credit housing units.

But a lot of that that's no really a figure that's present in Puerto Rico in the same way that it is in the states.

So those policies don't really apply.

So I guess, you know, given the longstanding tradition in Puerto Rico, just to leave policy related to social housing and housing affordability, to whatever the federa government is going to provide, it has left us short changed and we have to look for more local solutions in the short run, long term.

>>I'm going to ask you about local solutions in a minute but I wanted Fernando to respond to - to one point you said about the lower income folks being pushed out more.

Are you soon seeing are thos the people who are immigrating or leavin Puerto Rico in greater numbers since especially since Hurricane Maria?

>>Well, there's been obviously there's been waves of of of exodus from from Puerto Rico from for different reasons.

And we still kind of like the push at the beginning was more professional people where, you know, there were opportunities out there.

But we see that in terms of, you know, what are some of the opportunities?

And this is where states like Florida and Texas become a little bit affordable in the sense.

Right, that, you know, they they don't have state income tax and serve, but there's more opportunities and all those type of things.

But there's a perception in Puerto Rico that a lot of the folks with no resources are sort of being pushed out on, you know, especially in coastal communities or those desirable places that, you know, other investors want to really delve in out there.

So that's a constant type of issue of at least the perception that a lot of people without economic resources are sort of forced to be put out of there in terms of that.

And, you know, obviously we've seen that in other places as well, where you have kind of like this urban development, that development that usually forces some people out.

So we've seen that in Puerto Rico as well.

>>So I want to talk a little about that possible remedies.

Raul, can you what can you say?

What should be done?

What is the best approach to stabilizing the housing market in Puerto Rico?

Understanding, of course, that affordable housing is an issue that affects not just Puerto Rico but Florida, as well as the rest of the United States?

>>Yeah, no, I think that that's the main question.

I think it's helped me to think about solutions in two main lanes.

So to put up, so to speak, what is what are possible set of solutions to avoid a displacement of residents and communities that are already vulnerable.

Right.

And another set is that what are solutions to increase the affordable housing stock, which are very, very different, are probably the most complex and harder to harder to implement.

But on the first one, anti-displacement policies.

One of them is to actually, you know, implement more stringent regulations on short term rentals and how to protect, you know, that they can protect the affordable units that are already there.

I think that's an important set of regulations that have to take place.

I think another important set of anti-displacement policy that should be looked into is improving tenant rights when facing eviction processes in Puerto Rico.

I think I know that many states don't have just cause eviction policies set in place.

Puerto Rico does.

But even then, even with just class eviction policies, the the legal process is very much stacked against poor tenant in the sense that it's very hard to access legal representation in this eviction processes.

And, you know, it tends to be pretty much a pro forma process of almost automatically issuing the eviction notices.

I think the other one, which is more controversial, is rental stabilization policies.

And it's important that that the latter are well tied up to the policies for increasing the housing supply in a way that doesn't you know, disincentivize housing construction in other area and at the same time that that that there's a carrot and stick approach to how to implement rental stabilization policies.

Now on this I think there's a very good palette of possible approaches and policy designs that could take place, taking cue from different places in the US where it's implemented, but also in Europe, Asia, Latin America, even our own rental stabilization policies that are setting in place in Puerto Rico for 49 years between 1946 and 1995 was called [SPEAKING SPANISH] you know, the reasonable, Reasonable Rentals Act.

So that's one set of policies for anti-displacement and on how to increase the affordable housing stock.

And like I said, that's the hardest part.

That's the business that's the hardest part too.

And the ones that are going to take more time.

So I would say that one very low hanging fruit is for the government to take advantage of the fact that they can still access funding, federal funding to build between two and 3,000 public housing units in Puerto Rico for lowest income households.

Now, public housing her doesn't have to be these large exclusionary.

You, you know, exclusive an segregated housing development.

Housing project developments ar taking place in decades prior.

We have new ways to figure out how to build public housing, that that actually is cohesive and tie up to the neighbor and neighbor to the surrounding neighborhoods in ways that doesn't promote segregation of poverty concentration.

So that' definitely the low hanging fruit and that's funding that's already there.

The other, I think, is to prioritize the credits for low income housing tax credit are going to be available in higher opportunity areas.

So you don't want to build subsidized housing units in place that furthest from jobs and services and amenities that are attractive for everyone.

Those are the places you want to prioritize and those are the places tha are is more expensive to build.

So they need the deepest public subsidies.

I think the other thing is to take, you know, take advantage of the large vacant housing stock in Puerto Rico by speeding up the process of of property condemnation from the neighboring eminent domain, requiring those properties to then be used for affordable housing units, which could be turned into housing co-ops or community land trust, which are successfu models for housing, affordable for affordable housing both i the States and in Puerto Rico.

And that's mostly in the municipal area.

Oh, I think we have to try things that are not, you know, that are not being implemented in Puerto Rico, that are very commonplace for the states.

So one of those is we can look into eliminating parking requirements and zoning in urban areas near, like I mentioned, high opportunity areas, but also we can implement inclusionary zoning policies which are very commonplace throughout the states, which require a minimum quota of affordable housing units for new developments.

And that's not a policy that it's actually being implemented in Puerto Rico.

And I think we can we have to think and there's n magic bullet solution to this.

We kind of have to try it all at the same time if we want to, you know, have a structural impact on the - on the housing prices in Puerto Rico.

>>That's a good summary of five minute getting a remedy to a really difficult problem and huge challenge for Puerto Rico.

We just have a minute left and I wanted to ask Fernando.

The last three governors, including the current one, are leaving office involuntarily in Puerto Rico.

How much has housing played into anger at the ballot box?

>>I think, you know, housing definitely is one in terms and mostly the reaso the pace of the reconstruction.

I thin this is one of the big issues.

Another one is, is access to electricity or reliable electricity, which impacts, you know your housing decisions as well.

Those are becoming sort of key issues that are going to play out in this election as well.

So we'll be we'll be looking out to see if this pattern continues to happen out here in terms of that and whether kind of lik some of the solutions that Dr. Santiago brought up on are implemented or not.

>>Thank yo for your observations, Fernando.

Always good to have you on and thank you for joining us.

Dr. Santiago, really appreciate your insight on this important issue.

>>Oh, thanks for having me.

Pleasure to be here.

>>And thank you for joining us.

We'll see you again next week on another episode of Global Perspectives.