Many Puerto Ricans say they can no longer afford to stay in their homes as outside investors buy properties and drive prices up.
RINCÓN, PR – The last time strangers approached Samuel Sánchez Tirado while he was trimming his front lawn, he posed as a landscaper to leave him alone. He knew what these uninvited guests wanted, and he was tired of having the same conversation over and over.
Mr. Sánchez lives in Rincón, a coastal town in northwestern Puerto Rico famous for surfing and sunset that has become a hotbed for wealthy investors looking for tax breaks. The visitors, like so many before them, were interested in buying his one-story house, a two-minute walk from the beach. It’s not for sale, but that hasn’t stopped unwanted offers from coming in.
“They don’t ask you about the price,” he said. “They just hand you a check and ask you to fill in whatever you think the house is worth.”
This is a boom time for investors flocking to idyllic towns across Puerto Rico, some of whom seek to take advantage of tax incentives intended to attract newcomers and outside money to the island. the island lacks cash, that is work its way out of bankruptcy. Calls for tax relief accelerated after the coronavirus pandemic prompted many companies to switch to remote work, inspiring mainland Americans to move to more temperate climates.
But the wave of wealthy new settlers, who had to acquire residency and buy real estate in Puerto Rico within two years of moving in for tax breaks, has pushed up house prices and driven homelessness. residents who can no longer afford to live in their hometown have to relocate. . Hurricane Maria, the storm Thousands of homes were severely damaged in 2017caused many residents to leave the island.
The real estate boom, which began in the capital San Juan, has stretched across the island, as investors begin to move away from the metropolitan area and into smaller towns like Rincón.
There are newcomers in addition to those looking to reduce taxes, they are also buying real estate and driving up rents and home prices. But it’s the financial and technology investors that have officially applied for tax breaks that attract the most attention.
Many of them are crypto traders, who now host a weekly happy hour at a beachside bar in Rincón. A new barbecue cart opened in August that accepts Bitcoin, Ethereum, Cardano, Shiba Inu, Solana, and Litecoin for its mainland-style chicken.
The growing troubles of the era of localization make it difficult for many Puerto Ricans, who have become increasingly forceful to question how an economy depends on reducing Taxes for the rich could work for local residents who can’t increasingly afford to buy properties.
“It feels like Hurricane Maria has put a ‘For Sale’ sign on the island,” said Gloria Cuevas Viera, a Rincón resident who is helping lead the fight against domestication.
Many investors buy residential properties and then resell them for a higher price or turn them into short-term vacation rentals, turning entire neighborhoods into Airbnb lobbies and creating inventory shortages. warehouse for local people. Forty-three percent of Puerto Ricans live below the federal poverty line.
Israel Matos, 45, will have to move out of her Rincón home in March because the property owner sold it last year. Mr. Matos has an option to buy the house, but it has expired. The owner, from Hermosa Beach, California, has decided to sell to someone else.
Mr. Matos has lived at the house with his wife and two daughters for two years, and said he could not find a listing in Rincón that would fit his budget.
Mr. Matos, a sound engineer for a television station, said: “The pressure of being a father is a very difficult thing. “I never thought that I would fall into such a difficult situation when I was looking for a home to live with my daughters. And all because I don’t have $100,000 in the bank.”
The tax relief is included in a law called Act 60, a version of the act that was originally enacted by the Puerto Rican government under a different name in 2012, when the island was facing major disruptions. economic collapse. Motivation attract more interest after 2017, when Hurricane Maria ravaged the island. In 2019, tax breaks were repackaged to attract financial, tech, and other investors.
Those who move to the island can benefit from income tax breaks on their long-term capital gains, dividends, interest, and revenue from their services. In Silicon Valley, a Puerto Rican billboard is “a technology hub in sync with your vision”.
As of October, Puerto Rico has received 1,349 applications for 2021 – a record – from people looking to become investor-residents. Of those, 982 were approved. In total, more than 4,286 applications have been approved since 2012, with more than 35% of them approved in the past three years.
By law, an investor may be eligible for a tax break if he or she has not been a resident of Puerto Rico for at least the previous 10 years. The investor must also buy a home to enjoy the 4% tax rate and zero capital gains tax. The more than three million Puerto Ricans living on the island are not eligible for the tax relief.
“This is creating inequality in taxpayer liability,” said Heriberto Martínez Otero, executive director of the Ways and Means Committee in the Puerto Rico House of Representatives.
Martínez Otero, who also teaches economics at the University of Puerto Rico, said renters forced by sky-high house prices along the coast could be able to move to cheaper neighboring towns but could potentially have to spend more money on gas and tolls.
Of course, owners who sell their homes have benefited from rising property prices, and Governor Pedro R. Pierluisi has welcomed the fact that more investors are buying luxury homes – the downfall of The luxury real estate market is the main driver for him, he said in January through the tax bill’s passage.
“What is intended is an influx of people with capital to revitalize the real estate market,” he said.
The large number of people leaving the island is also a concern for policymakers. Affected by both the economic crisis and Hurricane Maria, the island’s population fell by 11.8% between 2010 and 2020, according to the census.
“But the reality is that there are buyers of residential real estate that don’t meet the realities of the consumption pattern in Puerto Rico,” said Martínez Otero.
Rincón landlord Sánchez, who poses as a landscaper, helps coordinate the town’s federal Section 8 program, which provides affordable housing to low-income families. The program offers the family a $450 monthly voucher to pay for a home, but he is struggling to find a home for that price.
“I worry that the native Puerto Ricans won’t be able to live or invest here and will eventually have to relocate,” he said. “I think prices are only going up in the downtown area, but real estate in rural areas in the mountains is getting expensive.”
In Rincón, Ingrid Badillo Carrero, a real estate broker, says house prices have skyrocketed over the past four years. In 2017, a two-bedroom apartment cost an average of $290,000. Now, the same unit can be listed for around $420,000.
Average annual income in Rincón is about $19,900.
“I’ve had locals tell me I’m selling my country,” said Ms. Badillo, who frequently deals with investor clients looking for tax breaks. Many are able to pay in cash, which is more appealing to sellers than to Puerto Ricans, who may only have the means to pay through a mortgage.
In May, Elizabeth Stevenson moved to Puerto Rico with her husband, Tyler McNatt, from Austin, Texas. They are looking to get out of the office on a daily basis and start exploring crypto investments as a way to generate income. Ms. Stevenson, an Act 60 beneficiary, is working as an advisor to a California film producer currently based in Puerto Rico, and also buys and sells cryptocurrency.
“It’s really exciting to have so much to learn and so much money to earn,” said Ms. Stevenson, who signed a one-year lease for an apartment about a 15-minute walk from the beach.
She is part of several cryptocurrency groups for foreigners that regularly organize events in Rincón. Daniel Torgerson, a crypto investor who moved to Puerto Rico in June, hosts a weekly happy hour at Aqua Marina Beach Club in Rincón.
In early January, about 20 people met around the bar and pool, talking under string lights and competing to the sounds of nocturnal coquí frogs.
“How is everyone feeling in the market this week?” Mr. Torgerson asked the crowd. “Are you interested in any new projects?”
“Solar Bitcoin Mining!” someone answered.
New residents are bringing their children with them. Myriam Pérez Cruz, principal of K-8 Manuel González Melo School in Rincón, said the school must add more subjects for students learning Spanish as a second language.
During the 2016-17 school year, a student survey identified three native English speakers in need of assistance in Spanish, Ms. Pérez said. For the 2021-22 school year, that number has grown to 17 students.
Mr. Matos, a Rincón resident who had to move out of his home in March, has been driving around recently looking for promising “For Rent” signs. Then he went to the beach, sat cross-legged in the sand and tried to relax. But as soon as he parked the car, he felt unwell.
“There were probably about 50 people on that beach, and I only saw people who looked like five Puerto Ricans there,” Mr. Matos said. “Rincón has changed a lot.”
https://www.nytimes.com/2022/01/31/us/puerto-rico-gentrification.html Tax cuts are driving a wave of real estate purchases in Puerto Rico