Supply Crunch
Over the past year, the rental market in San Juan, Puerto Rico experienced a significant supply crunch of houses. Some of this supply crunch can be directly attributed to changing consumer desires during the COVID-19 pandemic. In cities around the world, demand plummeted for small apartments in city centers while it surged for houses in the suburbs with additional space. I spoke with sources in San Juan who indicated that San Juan is no exception. Apartments near the beach in formerly desirable locations such as Condado and Dorado were particularly unpopular since public beaches and restaurants were closed for much of the year to reduce the spread of COVID-19.
Depletion in rental housing supply
The availability of rental houses on the island was also impacted by a booming sales market. Mortgage rates are at an all-time low, and this significantly increased the number of sales. Prices have risen accordingly, and many landlords who used to rent have sold their properties, reducing supply.
While these conditions have impacted rents around the island, certain neighborhoods have seen more extreme changes. The Guaynabo neighborhood is popular with expatriate families due to its proximity to international schools and it has seen a total depletion of rental housing supply that far exceeds other neighborhoods.
In previous years, Guaynabo had not seen major rent increases; there tended to be a relatively steady turnover of expatriates with stable supply and demand. However, that all changed in June of 2020. Facing a crumbling energy system on the island, the local government agreed to let external company LUMA take over energy management and distribution. As a result, LUMA moved a group of over 100 employees onto the island. These employees arrived with similar budgets and wanted to live in houses due to the pandemic. More than 30 expatriate families wanted to be close to international schools. Such a massive influx of assignees exhausted the limited supply of houses in Guaynabo, resulting in skyrocketing rents.
This has proved particularly onerous to expatriates who work on the island for pharmaceutical and manufacturing companies. Many of these expats could not travel to Puerto Rico over the summer because of laws restricting work permits due to the pandemic. When the restrictions were relaxed in the Fall, these expats arrived in San Juan to find non-existent availability in Guaynabo. Many families had to look for available houses in the Rio Piedras neighborhoods, about 15 minutes further from international schools.
LUMA signed a contract to modernize Puerto Rico’s energy system over the next 15 years. Puerto Rico is a small island with limited room for developing new housing supply. So, it is likely that the island’s housing crunch will continue for years to come.
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