
Introduction
Puerto Rico is currently facing a critical housing shortage fueled by many factors. From the lingering devastation of natural disasters, lack of new residential construction, and economic downturns to the rise of short-term rentals and a shifting demographic landscape, finding a place to call home has become increasingly challenging for many Puerto Ricans.
Even though there is a housing crisis in Puerto Rico, residential developers, and the Government must be careful not to propose too many residential projects as the housing market in Puerto Rico is expected to grow in the coming years. In the long term, several factors will contribute to the increase in the housing market, including the increasingly large housing availability as elderly people abandon their homes.
This article briefly researches and delves into the multifaceted reasons behind the island's housing crunch, exploring its impact on residents and the potential solutions being sought to address this pressing issue. Additionally, it explores how the housing crisis may resolve itself as we wait for the future population shift in Puerto Rico. This document discusses the impact of demographic factors on the housing market and the potential opportunities and challenges this future housing growth may bring.
Section 1. Background Overview of the Housing Market in Puerto Rico
The outlook on Puerto Rico’s housing market remains uncertain, amidst a weak housing supply, increasing migration, and interest rates. Based on figures from the Office of the Commissioner of Financial Institutions (OCIF) in 2023 the total number of houses sold in Puerto Rico fell by 4% y-o-y to 11,253 units, and it is expected to decrease again in 2024 by 7%. For the past decade, Puerto Rico has sold around 10,602 homes per year, of which 89% are used, 7% are new construction and 4% have been cash sales.

As established in the previous graph, over the last three years cash sales have increased drastically due to foreign investment, but it remains insignificant in the overall sales of housing units in Puerto Rico. Over the past ten years, the sale of new construction housing units has decreased by 54% due to low levels of new residential construction. The construction of new residential units has decreased dramatically due to the rising construction costs caused by the overflow of disaster recovery construction[1]. The high demand for construction services in Puerto Rico has inflated construction costs making the construction of new residential units not affordable for the average Puerto Rican and creating the current housing crunch.
As per OCIF data, in 2024 the average price of a newly built housing unit was $380,685, which is affordable to only 10% of the population[2] in Puerto Rico (PR). The current high construction costs make the construction of affordable residential units extremely difficult, which is the highest housing need in Puerto Rico. During the past six years, the price of new housing has increased, on average, by 12% each year. This massive cost increase is particularly due to the low new housing supply and the high construction costs.

To create affordable residential housing units in Puerto Rico, we need to look at used residential houses. Due to low housing inventory, used residential unit prices have also increased, but at a slower pace of 6.7% each year during the past six years. In 2024, the average price of a used housing unit was $212,254, which is above the affordable housing value in Puerto Rico. Puerto Rico is facing an acute affordable housing crisis. For every 100 low-income renter households, there are 34 units available that are affordable to them. As per the Puerto Rico Housing Finance Authority, in 2024 the island was short over 79,323 low-income housing units. The renter market will supply the most units to the affordable housing demand, but the upcoming surplus in the used housing market can supply some of the need for affordable housing and housing for young families.
[1] For more information refer to HI Project Consultant’s article: Puerto Rico’s Construction Capacity and the Disbursements of Disaster Recovery Funds – May 2024 - https://www.hiprojectconsultants.com/news-updates
[2] As per American Community Survey (ACS) Household income data for 2023, where median income in Puerto Rico is $25,621 and only 10% of households earn above $82,000, which is the minimum income needed to buy a $380,685 house.
Section 2. Forecast Availability of Housing in Puerto Rico
Given that there is currently a housing crisis and scarcity in Puerto Rico, we forecast the housing availability in future years and predict if the current problem will persist. To forecast housing availability in Puerto Rico we first consider demographic movement and assume that availability would be organically created by elderly people moving from their homes. First, we forecast the movement of the population 65 and older up to 2050, when the last of the “Baby Boomers” will leave the population[1]. The “Baby Boomer” generation was born between 1946 and 1964 during the mid-20th century baby boom. With 71.6 million people the “Baby Boomer” generation is the second-largest population group in the US, including PR, after the “Millennial” generation which is the largest with 72.7 million people. By this date, the youngest “baby boomer” is 61, while the oldest is 79. Below is the movement forecast over the years for people over 65.

The above forecast assumes that every person over 65 will remain in Puerto Rico until their death, with a 14% mortality rate for people over 80. According to the US Center for Disease Control and Prevention (CDC) 2023 data, the life expectancy of Puerto Ricans is 81.89, which is considered in the mortality rate used. Migration in this population cohort is not common and thus is not considered in this analysis.
Our population forecast analysis shows that during the next five years (from 2025 to 2030) the population over 65 will increase at a high rate of 3% each year. After 2030 the population growth for this segment will be normalized and below 1%, but it will remain over 900,000 for the next 20 years up to 2050. The population peak for this segment is estimated to be in 2042 with 952,649 people over 65.
To estimate future housing availability, we start with the forecasted aging population as a baseline dividing it by the number of residents per home, times the housing unit’s owner occupied, and times the percentage of homes that will be sold and not passed down to family or unsellable. To better understand our analysis below are the assumptions and formula used in our future housing unit availability model.

Where:
AHU - refers to Available Housing Units per year
EPF - refers to the Elderly Population Forecast of people over 80
MR - refers to the Mortality Rate of 14% for people over 80 years in Puerto Rico, as per 2024 CDC data.
RH - refers to the number of residents per household over the age of 65 (per ACS data) of 1.51
OOH - refers to the percentage of owner-occupied housing units over the age of 65 (per ACS data) of 82%
HUS - refers to 60% of housing units available to be sold once vacated. The rest (40%) are assumed to be handed down to the family, have inheritance problems, or are too damaged to sell.
The previous formula is performed for every forecast year, from 2024 to 2050. Housing vacancies from younger cohorts are not considered in this analysis as movement from one house to another cancels each other and does not create supply. Housing vacancies created from migration are also not considered as they are minimal provided that most Puerto Rican migrants are renters and not homeowners. The results of the Housing Availability model are shown below.

As per our Housing Availability model, the year 2042 will be the highest peak of housing availability with 18,936 houses entering the market in one year in Puerto Rico. It is important to note that this does not represent housing sales but housing availability due to elderly people vacating their homes. Based on historical housing sales and future demand, housing sales will be much lower. As established previously, for the past 9 years housing sales in Puerto Rico averaged 10,602 sales per year. In 2021, an outlier year, housing sales reached 14,115. In our analysis, we consider housing sales of 14,000 as the peak capacity of sales provided the declining demand due to the migration of young people and the aging population not in need of housing. Provided this sales capacity ceiling, it is estimated that in five years (2030) housing surplus will begin to accumulate at an average rate of 3,600 houses per year with an estimated accumulated housing surplus of 76,100 available houses for 2050.
The aging population will create a housing surplus that will solve the current housing crisis in Puerto Rico. For the younger generations, and those willing to wait, housing availability and pricing will be much more reasonable after 2030, when the accumulated housing supply will be higher than the demand and will increase availability and lower housing prices.
[1] For more information regarding population forecast refer to HI Project Consultant’s article: Puerto Rico's Population Decline: The Baby Bust Era – March 2024 - https://www.hiprojectconsultants.com/news-updates
Section 3. The Future of the Housing Market in Puerto Rico
The influx of housing units entering the Puerto Rican market after the baby boomer generation abandons their homes could lead to a few potential scenarios. The potential outcomes of the shift in demographics could be:
Increased Affordability: A surplus of homes could drive prices down, making homeownership more attainable for younger generations and potentially attracting investors. The result of the increase of demand with supply equally could stimulate the housing market and boost the economy.
Market Stagnation: If demand doesn't keep pace with the increased supply, the market could stagnate, with slow or no price growth. This could make it difficult for sellers and potentially lead to a decline in property values.
Shifting Housing Preferences: The types of housing left behind will play a role. If the majority are large, older single-family homes, they might not appeal to younger buyers who may prefer smaller, more modern, or urban living spaces. This could lead to certain types of properties becoming less desirable.
Investment Opportunities: The availability of more affordable properties could incentivize local real estate investors, who may renovate and resell or rent them out as short or long-term rentals, potentially revitalizing certain depressed neighborhoods.
Regional Variations: The impact will likely vary across the island. Areas with high demand and limited new construction could see less of an effect, while those with a declining population might experience a more significant surplus.
Provided that in five years (2030) the excess of used housing supply will start, policymakers should focus on incentivizing the purchase of used homes rather than the construction of new ones since, even with incentives, new housing unit pricing would go over the affordable housing threshold. Some incentives or policies that should be developed or restarted for the purchase of used homes are:
“La llave para tu Hogar” – In 2001 this program was developed by the Department of Housing of Puerto Rico and its main objective was to provide grants to home buyers for either their mortgage down payment or to remodel the home. Total grants per family were based on income levels. This incentive would be essential for young new home buyers who either need the cash to get a loan or to rehabilitate the home to a modern state.
“Mi Casa Propia” – is another incentive used to rehabilitate homes in urban centers.
Homebuyer Assistance Program (HBA) – This program provides financial assistance to eligible first-time homebuyers with low to moderate incomes. It offers grants up to $55,000 for down payment and closing costs. The amount can increase to $60,000 if the property is in a designated urban center.
Mortgage Interest Rate Subsidy Program – This program helps reduce your monthly mortgage payments. The Puerto Rico Housing Finance Authority (PRHFA) may subsidize a portion of your mortgage interest, making your payments more affordable. This program is also subject to family income limits.
Municipality Incentives – Some municipalities in Puerto Rico offer incentives for first-time homebuyers. These can include property tax breaks, assistance with closing costs, or even grants.
Private Property Debris Resolution – Some used homes do not enter the housing market due to inheritance problems, legal disputes, or other problems. Knowing that in future years this could be magnified, policies should be amended where the Government (CRIM) could incentivize investment in used housing and existing housing inventory.
The influx of housing after the baby boomer generation is likely to create both opportunities and challenges. While increased affordability could benefit some, it's crucial to monitor demand, adapt to changing preferences, and ensure a balanced market to avoid potential negative consequences like stagnation or declining property values. Government incentives will help get rid of future housing surplus and with the sale of older family homes that might not appeal to younger buyers who may prefer smaller, more modern, or urban living spaces.
Section 3. Findings & Conclusion
The aging population in Puerto Rico will cause a surplus of housing units in the future. As the baby boomer generation ages, there will be an increase in supply in the housing market. Some key takeaways to consider are:
Puerto Rico is currently facing a housing crisis due to a combination of factors including natural disasters, lack of new construction, economic downturns, and the rise of short-term rentals.
Over the past decade Puerto Rico has sold around 10,602 houses each year, most (89%) used houses. During the same decade, the construction of new housing units decreased by 54%.
Due to the low inventory of new housing units, prices have increased 12% each year to an average price of $380,685
High construction costs make the construction of new affordable housing difficult in Puerto Rico.
As per ACS data, for 2023 38.8% of all owner-occupied housing units were families 65+. This rate is expected to grow at a rapid pace of 3% each year, up to 2030.
Despite the current housing crisis, in five years (2030) a surplus in the housing market will start due to the aging population, particularly the baby boomer generation. This surplus is expected to peak in 2042, with the housing market supply continuing to grow until 2050 when the last of the baby boomers will have passed.
The used housing surplus could lead to increased housing affordability, making homeownership more accessible to younger generations, but could also cause market stagnation if demand doesn't increase.
The types of housing left behind by baby boomers will influence the market. If the majority are large, single-family homes, it may not align with the needs of a younger population seeking smaller or more modern options.
The impact of the surplus will likely vary across the island, with areas of high demand potentially seeing less of an effect, while those with declining populations might experience a more significant surplus.
Government incentives may aid the sale of future surplus of used homes in Puerto Rico.
So, why is this information relevant? Currently, there is a housing crisis in Puerto Rico that could lead to the over-construction of residential units. Knowing that the future state of the housing market is one of surplus helps solve the current housing market problem, avoiding future consequences of over-supply. The over-supply of new homes could lead to a housing bubble, like the one experienced in Puerto Rico in 2007. To avoid a housing bubble with upside-down mortgages (where the home's value is less than the mortgage owed) and other consequences, the development of new residential units should be limited to around 800 units per year for the next five years[1]. After year five the housing surplus of used homes should take care of any housing demand in Puerto Rico since remodeling a home is often more cost-effective than building a new one.
In conclusion, the current housing crisis in Puerto Rico will likely resolve itself as the housing market availability grows due to shifting demographics. The only thing left is to wait as the housing market grows, and the younger generations will most likely be the biggest beneficiaries of the excess housing supply forecasted in Puerto Rico.
[1] Based on historical sales from OCIF of new homes in Puerto Rico.
Disclosure
The views in this article are solely the responsibility and the opinions of the author and HI Project Consultants, LLC. Opinions should not be interpreted as reflecting the views of any other company affiliates. All information used in this article is public, published information referenced in each table and/or graph.
About the Author

Hector Rivera, MBA, PMP, ChE, is an economic advisor with over 20 years of experience in economy, finance, M&A, and federal funds. He has worked for “Fortune 500” financial firms in New York City, top consulting firms in Puerto Rico, and Leadership roles in Government Agencies in Puerto Rico such as COR3 and FOMB. Currently, he is HIPC’s Economist and Director.
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