“Our house is a very, very fine house with seaside views from our yard, life used to be so hard, now everything is easy ‘cause of tax breaks.” That’s how Graham Nash might have written a 21st-century version of the Crosby, Stills & Nash classic—you’d just have to sub in crypto bros and Puerto Rico in the 2020s for hippies and Laurel Canyon in the 1970s.
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Since the pandemic began, wealthy individuals and remote workers have been moving to other states and even countries to live larger while the cost of living remains high. Florida became one of the biggest hotspots, but the influx of people made the Sunshine State less affordable as skyrocketing housing prices push out its retiree population to cheaper places like Alabama. Now remote workers and the ultrawealthy have found a new housing market to wreak havoc on: luxury villas in Puerto Rico.
The trend has been a “slow burn” since 2012 when significant tax breaks began, Peter Bazeli, principal and managing director at luxury real estate firm Weitzman, told the Wall Street Journal. But it really accelerated in 2019 when modifications were passed as part of Act 60 that enabled qualifying new non-local Puerto Rico residents to not pay any federal taxes. It’s a better deal than Florida with the same warmth and sunshine; while Floridians enjoy some of the lowest overall taxes in the nation, including no income tax and an average combined sales tax just over 7%, they still have to pay federal taxes. Coupled with the rise of remote work, Puerto Rico’s stronger tax breaks emboldened everyone from crypto bros and families to digital nomads and businesses to flock to the island.
It's “created this almost club of high-net-worth households that have chosen to establish residence in Puerto Rico,” Peter Bazeli, a principal and managing director at luxury real estate firm Weitzman, told the Wall Street Journal.
The resulting housing boom breathed “new life into the Puerto Rican economy” as early as 2020, Rodrick Miller, chief executive of Invest Puerto Rico, told Realtor.com. The median sale of million-dollar homes in the exclusive Dorado Beach area spiked from $3.4 million in 2021 to $6.2 million in 2023, per data provided to the Journal by Sotheby’s International Realty. While regular deals have curbed recently thanks to economic issues, sinking crypto, and low inventory, local real estate agents told the Journal (the median home listed in San Juan is $550,000, a 26.4% increase from last year, but a long way down from its peak of $1.15 million two years ago), interest in luxury houses remains high—the Journal cited a house sold for 33% above the original price for $40 million as a prime example.
But there’s an exclusivity to this migration. In contrast to the growing luxury lifestyle, Puerto Rico has been battling a recession and massive debt; yearly economic growth decreased by 12.5% between 2004 and 2020, according to the Council on Foreign Relations (CFR). While census data shows that 40% of Puerto Rico’s residents live in poverty, 4.9% lower than when tax breaks were introduced more than 10 years ago, the percentage is still high—and the poverty rate in Puerto Rico is greater than double that of the poorest state in the United States, per the CFR.
The council's data also shows that most native Puerto Ricans have left the island; migration patterns became a bit of a cat's cradle as wealthy Americans ditched Florida for Puerto Rico and some Puerto Ricans moved to Florida for greater opportunities (especially after receiving minimal support post natural disasters).
“If anybody needs to be moving and buying in Puerto Rico, it needs to be the Puerto Rican people who had no other choice but to leave,” María Torres-López, a former resident of Puerto Rico and founder of the nonprofit Diáspora en Resistencia, told Time in 2021.
Still, the wealthy keep pouring in, making Puerto Rico "our house," or playground, even if their money is pocketed in their isolated villas.
This story was originally featured on Fortune.com
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