Puerto Rico’s housing crisis is no accident—it’s by design

Puerto Rico faces some of the most significant affordability challenges in the United States, yet it is often overlooked in national housing policy discussions. While many of the same problems—such as rising home prices, displacement, and aging infrastructure—are present in various states, Puerto Rico’s territorial status introduces unique constraints that shape its housing challenges. For over a century, Puerto Rico has existed in a legal and economic limbo, subject to U.S. federal laws while lacking full political representation.

This ambiguous relationship, where Puerto Rico is governed by the U.S. but not fully integrated, has contributed to market distortions, driven up costs, and restricted economic growth. Policies like the Jones Act and federal oversight through the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) have made it more difficult for Puerto Ricans to afford housing. Additionally, the archipelago’s limited autonomy hinders the development of local solutions. As a result, Puerto Rico is caught in a cycle of displacement, rising costs, and dependency due to structural barriers beyond the scope of local policymakers. Resolving the question of political status would not only address long-standing constraints of self-determination but would also open the door to more comprehensive and effective housing strategies.

The roots of Puerto Rico’s housing crisis

Puerto Rico’s housing crisis is a result of long-standing displacement and property challenges. Many residents have migrated to the U.S. in search of better economic opportunities, a trend that intensified after Hurricanes Irma and María devastated the archipelago in 2017. A significant barrier to recovery is that many Puerto Ricans do not have formal property deeds. This often results from generational land subdivisions and verbal agreements that were never officially recorded. As a result, many were denied disaster aid from the Federal Emergency Management Agency (FEMA), preventing them from rebuilding and deepening housing instability.

The combination of natural disasters, economic decline, and policy failures has led to widespread property abandonment. Today, Puerto Rico has the highest number of vacant properties in the U.S., with nearly 30% of housing units either abandoned or not on the market, far surpassing states like Maine and Vermont. Rather than using these vacant units to meet local housing needs, policy decisions have made the market more attractive to outside interests than to Puerto Ricans themselves.

At the same time, policy decisions favoring outside investors over local residents have further distorted the housing market. Act 22, part of Puerto Rico’s tax incentive program, allows U.S. investors to move to the archipelago and pay zero federal or local taxes on their capital gains and passive income. While the intent is to attract investment, the policy prioritizes wealthy newcomers at the expense of Puerto Ricans, many of whom are priced out of their own communities. Although Act 22 is a local law, it reflects the broader limitations imposed by Puerto Rico’s political status. As a U.S. territory, the archipelago has limited authority to develop economic strategies or trade policies that serve the long-term interests of its people. With greater autonomy, Puerto Rico could pursue global investment on its own terms, without relying on incentives that benefit outsiders more than residents.

This tension between attracting capital and protecting residents is at the heart of the housing crisis, especially when policies are designed without full political or economic self-determination. As a result, this approach has created a lopsided market where incoming investors benefit from special treatment, while everyday Puerto Ricans face high energy costs, rising home prices, and limited access to capital. The government’s preferential treatment of these outside actors has shaped a housing system that caters to profit-driven speculation, not long-term stability or affordability for local residents. And even when Puerto Rican leaders try to implement reforms, they’re often constrained by federal oversight or denied the autonomy needed to respond effectively to the archipelago’s housing needs.

These broader economic limitations are not abstract—they show up in people’s daily lives and in the affordability crisis unfolding across the archipelago. In 2024, average home prices increased by 15%, with the typical home now costing $221,824. New homes surged even more—by 20%—reaching an average price of $351,407. Meanwhile, Puerto Rican families earn only 61% of the income needed to qualify for a mortgage, and the median household income is just $25,621. Homeownership is becoming increasingly out of reach, and renters are also facing financial pressure. These dynamics are pushing people out of their communities, driving up displacement, and worsening the cycle of abandonment.

PROMESA and Puerto Rico’s constrained fiscal authority

In 2016, Congress enacted PROMESA in response to the archipelago’s $72 billion debt crisis. The law established the Financial Oversight and Management Board (FOMB), commonly referred to as La Junta, to oversee Puerto Rico’s finances and restructure its debt.

But the roots of the crisis run deeper. For years, locally elected leaders avoided making hard decisions, delayed structural reforms, and allowed dependency on federal funds to grow. Rather than addressing the growing debt when it was still manageable, they allowed problems to build until outside intervention became unavoidable, leaving Puerto Rico vulnerable to the kind of fiscal oversight that PROMESA now imposes. Since its implementation, PROMESA has prioritized debt repayment, often at the expense of public services and long-term investment. More than 600 public schools have closed, funding for the University of Puerto Rico has been drastically cut, and many essential services have been reduced. These cuts have made it more difficult to recover from disasters, invest in affordable housing, or establish stable economic conditions.

Puerto Rico’s limited political power exacerbates this challenge. Unlike U.S. states, the archipelago lacks full representation in Congress and doesn’t control its fiscal future. Financial Oversight and Management Board for Puerto Rico (FOMB) members hold sweeping authority, but they’re not elected by or accountable to Puerto Ricans, deepening the sense of disconnection from those making critical decisions that affect daily life. This is similar to what happened in Greece during its debt crisis, when external creditors imposed harsh austerity policies that led to deep cuts and long-term consequences. In both cases, fiscal control by outside actors, regardless of intent, has made it nearly impossible to prioritize long-term recovery while meeting short-term repayment demands.

Ultimately, PROMESA is a symptom, not the root cause. It reflects the long-term consequences of failed leadership but also underscores what happens when a place lacks both economic autonomy and the political power to chart its own path forward.

Other federal policies that fuel the crisis

Several federal laws further limit Puerto Rico’s capacity to respond to its housing crisis:

1. The Jones Act and its impact on the cost of living

The Jones Act (Merchant Marine Act of 1920) is a federal law requiring that all goods shipped between U.S. ports be transported on U.S.-built, owned, and operated vessels. This restriction has made Puerto Rico one of the most heavily impacted regions, driving up shipping costs and limiting trade efficiency.

A recent study by economists Russell Hillberry and Manuel I. Jimenez, published by the Cato Institute, estimates that the Jones Act imposes an annual burden of $1.4 billion on Puerto Rico, effectively functioning as a 30.6% tariff on shipping. Puerto Rican consumers alone shoulder $692 million of this cost annually— a hidden financial burden that has rivaled or exceeded typical U.S. tariffs on imports in recent years, and may become even more painful as new tariffs take effect. Additionally, the law increases the cost of investment by $403 million per year, discouraging economic growth and making housing and infrastructure development even more expensive.

This means that construction materials, appliances, and essential goods are significantly more expensive in the housing market, making homebuilding and renovations increasingly unaffordable. It also disrupts supply chains, leading to delays in disaster recovery efforts. Despite numerous calls for reform over the years, the Jones Act continues to be in effect, disproportionately affecting Puerto Rico while failing to provide the intended national security benefits.

2. Federal disaster aid and housing recovery

Puerto Rico’s territorial status has limited its access to federal disaster aid, especially after major hurricanes. Unlike U.S. states, Puerto Rico receives FEMA and U.S. Department of Housing and Urban Development (HUD) disaster funding under different conditions and often faces longer delays. After Hurricane María, over 330,000 FEMA applications were initially denied, with around 79,000 rejections tied to a lack of formal property deeds. Many Puerto Ricans inherit property informally through generational arrangements, leaving them without official titles. As a result, thousands were deemed ineligible for aid and unable to rebuild, deepening housing instability and fueling migration to the mainland.

In addition to the FEMA denials, the federal government’s overall response was slow and uneven. This contributed to a wave of displacement and abandonment of homes across the archipelago. Bureaucratic hurdles and additional layers of oversight uniquely applied to Puerto Rico delayed the disaster recovery process by over $20 billion in HUD disaster mitigation funds. Internal reviews later confirmed that HUD’s own policy bottlenecks also played a significant role in delaying the disbursement of urgently needed aid.

3. HUD and Section 8 housing funding disparities

Beyond disaster recovery, Puerto Rico continues to face long-standing disparities in federal housing assistance. Despite a poverty rate of over 40%—more than double that of the poorest U.S. states—the archipelago receives less federal housing support per capita than many places with fewer challenges. In FY 2024, Puerto Rico’s Public Housing Administration received approximately $178 million from HUD’s Capital Fund. However, this level of support falls short when measured against the scale of need across the archipelago.

One reason is that HUD’s funding formulas are based on data sets and criteria tailored for the 50 states, often failing to accurately reflect Puerto Rico’s economic conditions. These formulas can underrepresent the severity of poverty, housing insecurity, and infrastructure needs in the territory. Puerto Rico also faces recurring delays in accessing HUD funds—even when allocated—due to administrative complexities and overlapping federal oversight. These structural barriers have left Puerto Rican residents with fewer affordable rental options and little recourse in the face of rising housing costs.

4. Energy and infrastructure costs drive up housing expenses

Puerto Rico has some of the highest electricity costs in the U.S., with residents paying 23.77 cents per kilowatt-hour as of 2024, 41% higher than the U.S. national average of 16.88 cents per kWh. The high costs are primarily caused by a mix of fuel price fluctuations, regulatory inefficiencies, and Puerto Rico’s limited capacity to negotiate energy trade agreements due to its territorial status. Additionally, the Jones Act contributes to these elevated costs by mandating that imported fuel be transported on expensive U.S.-flagged ships, which restricts the archipelago’s ability to pursue cheaper alternatives.

While home prices in Puerto Rico are rising, high electricity costs make homeownership and renting less affordable. Frequent power outages and infrastructure failures add further financial strain, and under PROMESA, debt repayment has taken priority over critical energy investments. As Northeastern University Professor Laura Kuhl explains, “It’s impossible to understand anything about energy policy in Puerto Rico without acknowledging how much of its colonial relationship impacts all decision-making and all aspects of daily life.”

Recently, a loophole in the Jones Act allowed Puerto Rico to begin receiving U.S. liquefied natural gas (LNG) via an older U.S.-flagged ship built before 1996. While this marks the first LNG shipment from the mainland in years and may bring some savings, it’s no long-term solution. The vessel, American Energy, is over 30 years old and costly to operate, far less efficient than modern tankers.

A sovereign path to housing stability

Puerto Rico’s current territorial arrangement makes it extraordinarily difficult to address the housing crisis in any meaningful or lasting way. Federal laws like the Jones Act inflate the cost of importing construction materials, food, and basic goods, making life and homebuilding more expensive across the board. PROMESA, the federally imposed fiscal control board, continues to prioritize debt repayment over basic investments in housing, infrastructure, and energy. Without the legal authority to restructure its own economy, Puerto Rico remains trapped in a cycle of dependence that blocks locally driven solutions.

Independence would give Puerto Rico the ability to negotiate its own trade agreements and diversify its economy beyond the limitations of U.S. policy. It would enable Puerto Rico to design tax structures that serve the long-term interests of Puerto Ricans, instead of catering to wealthy outsiders. Rather than relying on flawed incentive programs like Act 22, Puerto Ricans could support local business development and create housing strategies rooted in the needs of their own communities, not the priorities of distant investors. Sovereignty would also give Puerto Rico the power to restructure its energy sector, invest in resilient infrastructure, and revitalize the thousands of abandoned properties that sit unused while families struggle to find affordable places to live.

Statehood, by contrast, would not necessarily resolve these foundational challenges. Many U.S. states are already grappling with federally induced housing crises driven by zoning restrictions, sluggish disaster aid, and inequitable HUD formulas. Statehood would not give Puerto Ricans the full decision-making power to design an economic future tailored to their specific and unique needs. Transferring oversight from one distant government to another would still leave Puerto Rico without the sovereignty to shape policies based on its unique context.

Ultimately, Puerto Rico’s housing crisis is not just a matter of policy inefficiencies—it’s a question of control: a question of who gets to decide what kind of future Puerto Rico builds, and for whom. For decades, its housing system has been influenced by external interests, resulting in displacement, speculation, and increasing inequality. Families are being priced out of their neighborhoods, and young people are leaving Puerto Rico in search of opportunities that should be available at home. Communities that have existed for generations are disappearing.

Sovereignty is not just a political concept; it is a practical means of safeguarding communities and ensuring that Puerto Rico serves the needs of its residents. The island must have the authority to protect what it has built, address what has been overlooked, and create a future where staying is not only possible but also sustainable.

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Source: https://reason.org/commentary/puerto-ricos-housing-crisis-is-no-accident-its-by-design/