Success Stories

Puerto Rico REALTORS® Pull Out All the Stops to Fight a Tax on Services and Win

June 2016

The REALTORS® of Puerto Rico are no strangers to challenge.

With an unemployment rate at more than twice the national average and foreclosures up almost 90 percent since 2008, the Puerto Rican real estate markets are tough, to say the least. 

On top of that, the 350-member Puerto Rico Association of REALTORS (PRAR), relies on an all-volunteer staff to run its day-to-day operations. 

So when Vanessa Rivera, PRAR’s 2016 president, together with her leadership team, decided to fight a tax on services—that included commissions, appraisals, surveys and all that goes into closing a real estate transaction—they pulled out all the stops. 

Last year, under tremendous pressure to pay down $72 billion in debt, the Puerto Rican government imposed a 4 percent tax on services, with a provision to increase the tax on April 1 to 10.5 percent, plus give each municipality the option to add 1 percent, effectively raising the tax to 11.5 percent—the highest tax on services in the United States.   

No one seemed to have the energy to fight it, until the Puerto Rico Association of REALTORS® stepped in.

All or Nothing

Mike Ford, a REALTOR® from West Memphis, AR, who began working closely with PRAR last year when he served as a NATIONAL ASSOCIATION OF REALTORS® Vice President, offered his guidance in tapping into the multitude of REALTOR® Party Resources available, and they got to work.

“At first, the Puerto Rico REALTORS® thought they might only be able to repeal the increase in the tax.  We knew it would be an uphill battle.  But once we got to work, we decided we were going to fight all or nothing and get real estate removed from the tax all together,” Ford recounts.

Using an Issues Mobilization Grant, PRAR hired a lobbying firm, polled voters, ran radio and online ads, conducted phone banks and employed direct mail. 

In addition, PRAR hosted a “REALTOR® Day at the Capitol,” with more than 100 of the association’s 350 members participating. 

“The REALTORS® of Puerto Rico were unstoppable,” Ford explains. “We pushed our bill to stop the tax increase in their Capitol’s hallways, on the airways, in the papers, online and over the phone.

The REALTORS® of Puerto Rico Became the Voice for This Issue

“They have the same problem in Puerto Rico that we have across the rest of America—there is very little bi-partisan support for anything,” Ford said.  “The REALTORS® became the voice for this issue, and we were able to garner the bi-partisan support we needed.”

Even the lobbying firm PRAR hired to help them was amazed by the REALTOR® participation in the campaign.  “Frankly, they had never seen anything like it by another group,” Ford said. 

Late last month, the Puerto Rico House and Senate both passed PRAR’s bill repealing the tax increase, and then overturned the Governor’s veto, leaving the tax on services at 4 percent.

At the end of the Senate vote, the President of the Senate asked the REALTORS® to stand and be recognized, Ford recalls.  “He gave them credit for this legislation and recognized them as the Voice for Real Estate.”

The Next Step

Ford is quick to point out, “this is just the first part of our success story…the second part will come when we get the tax on real estate services completely removed.”

He is confident that the association can pull this off as the Puerto Rico legislature considers its budget, which must pass by the close of the session on June 28.  Removal of real estate from the 4 percent tax on services is in the form of a technical amendment to the budget.

“The two keys to our success are first, the all-out enthusiasm and participation of the Puerto Rico members and second, good solid facts about how a tax on real estate services actually works against the economy, rather than helps it,” Ford said.

Powerful Numbers

NAR Research did an analysis showing that the tax increase would have knocked 3,600 home sales out of the market in the first year, subsequently keeping $128 million from entering the local economy.  Each home sale generates more than $36,000 in economic activity in the form of insurance, landscaping, furniture sales, remodeling, appliance sales, moving trucks and more.

“Once REALTORS® came to lawmakers with this information, our argument turned from emotional to fact-based,” Ford said. “The numbers were powerful and the REALTORS® were persuasive!”

Now, for the next phase of the campaign, PRAR is armed with a new set of numbers showing that the current 4 percent tax is cutting out 1,340 home sales, or $47 million per year from the Puerto Rican economy.

“The tax is regressive and is a contributing factor to the stagnant housing market,” Ford explained. 

“Our message in our phone calls to and meetings with lawmakers is that we need to do all we can to encourage home sales, not discourage them—housing is the key to recovery—it always has been in our nation, and it is the same in Puerto Rico!”

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