A new report from the Center for a New Economy, “The Impact of Short-Term Rentals in Puerto Rico: 2014-2020,” examines the impact of short-term rentals on the housing market in Puerto Rico. Short-term rentals, which are defined as dwellings that are rented for a period shorter than 90 days, were found to increase median rent and housing prices. Contrary to common perception, the economic benefits of short-term rentals also accrued disproportionately to professionals operating multiple properties rather than homeowners seeking supplemental income by renting a spare room. The authors conclude that a robust regulatory framework is needed to ensure that short-term rentals do not further exacerbate the ongoing housing crisis in Puerto Rico.
Using data from AirDNA, the authors documented over 30,000 unique short-term rental listings in Puerto Rico from 2014 to 2020. Contrary to some portrayals of short-term rentals, most listings were not from homeowners renting out empty rooms for additional income. Approximately 83% of the listings in Puerto Rico were for entire homes. Just 15% of the listings were for private rooms, and the remaining 2% were for hotel rooms and shared rooms. Listings for entire homes, moreover, drove the growth in short-term rentals between 2014 and 2020, with listings for entire homes increasing from fewer than 2,000 in October 2014 to approximately 10,000 by the end of 2019. Private room listings remained below 2,000 for the entire period.
Control of short-term rentals and short-term rental revenues appeared to be concentrated among a subset of hosts with multiple listings, suggesting the commercialization of short-term rentals in Puerto Rico. For example, although most Airbnb hosts (61%) listed only one property between 2014 and 2020, the 39% of Airbnb hosts who listed two or more properties were responsible for 69% of the total listings and received 79% of the revenue. In terms of actual dollar amounts, between 2014 and 2020, Airbnb hosts with single listings earned almost $154 billion in revenue, while hosts with multiple listings earned over $575 billion.
Since short-term rentals can diminish the long-term rental supply, the authors further examined the impact of short-term rental listings on median rents and home prices in the San Juan region. After controlling for other factors, the authors found that a 10% increase in the share of short-term rentals resulted in an average increase of 7% in median rent and 23% in median home prices. In light of this finding, the authors suggest housing market impacts might be especially pronounced in coastal municipalities, which are popular tourist destinations and typically have higher shares of short-term rentals. In Culebra, for instance, the number of short-term rentals equals or surpasses the number of units available for long-term rent, and the area has only a few dozen subsidized long-term rental units, meaning that the affordability of rental housing is especially susceptible to market shifts.
In addition to their analysis of market impacts, the authors found that disasters significantly impacted short-term rental listings between 2014 and 2020. Daily Airbnb listings, for example, increased on average 31% in the wake of Hurricane Maria. The onset of the pandemic and the lockdown in Puerto Rico, on the other hand, were associated with a nearly 58% decline in average daily listings, while the end of the lockdown was associated with a 37% increase.
According to the authors, these findings point to the need for greater regulation that minimizes the negative impacts of short-term rentals on Puerto Rico’s housing market. They outline several policy approaches that have been implemented by different cities around the world, such as restrictions on location and the number of nights short-term rentals can operate, licensing and registration requirements for hosts, and fines in cases of non-compliance. However, given that the challenges involving short-term rentals have only emerged in the last few years, the authors note that these policies have not been adequately studied.
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