Low interest rates have helped spur development of both low-income and high-rise housing, sparking a second boom that has brought a new influx of foreign investment into the country.

The Costa Rican real estate market can be split into two: low income and wealthy. In keeping with regional and global trends toward growing inequality, both groups are growing; Costa Rica's poverty rate has remained stagnant at just over one-fifth of the population at the same time a wave of expensive condominium housing has flooded the San José and coastal resort towns with foreign money. The challenge facing the Costa Rican government is to ensure that the housing deficit is met; that social services continue to be provided without sinking the country's fiscal position; that high-rise construction continues with appropriate regulation; and that all this is done in such a way that the country remains an environmental and economic leader in the region for years to come.

For all its wealth and economic stability, Costa Rica's poverty levels have remained frustratingly stagnant. More than 1.1 million Costa Ricans live in poverty as of 2015, according to the National Statistics and Census Institute (INEC). One of the Ministry of Housing and Human Settlements' (MINVIH) main goals is to provide quality housing for these low-income Costa Ricans, a group facing a significant housing deficit. MINVIH leader Rosendo Pujol Mesalles told TBY that the government's current goal is to deliver 9,600 housing units to low-income Costa Ricans by the end of the current government in 2018. However, all agree that the number of low-income Costa Ricans without adequate housing is greater than that, with Mesalles estimating that it will take almost two decades to eliminate the housing deficit for the poorest families.

To tackle the country's core housing issues, the Housing Ministry is continuing to implement core initiatives that target housing deficiencies. Costa Rica's government does not handle construction itself, so its assistance primarily comes in the form of cash transfers to prospective homeowners and builders. Costa Rica's primary home finance lender for this purpose is the National Housing Mortgage Bank (BANHVI), an autonomous financial institution dedicated to offering housing assistance for low-income Costa Rican families. As a “second-level" lender, BANHVI does not make direct loans but deals with authorized entities that then deal with individual families. However, it does have a system of grants that are awarded to low-income prospective owners. There are different types of grants available; one program gives grants to families that already own a plot of land, and another gives money to homeowners looking to expand or structurally repair their existing homes. The year 2015 saw more than 8,000 of the former and 1,000 of the latter awarded. Another indirect program works with housing developers, giving them funds to purchase land and construct low-income housing. These indirect programs, Mesalles says, assist more than 2,000 families a year. On the whole, these programs have been successful when implemented; government data shows that female teenagers who live in a government-funded house are 30% more likely to complete their education, a figure that speaks volumes about the positive externalities that results from such programs. With such positive outcomes, it is little wonder that the Costa Rican government is focusing on matching the program to areas and populations who need it most; low income, at-rick housing, shantytown residents, and women who need protection, to name a few groups.
BANHVI, while perhaps the single most impactful entity in the Costan Rican housing sector, is not without its flaws. Somewhat unsurprisingly for a massive financial institution, it has at times been plagued by accusations of waste and disorder. A July 2016 audit found that housing disbursements were not being distributed evenly among geographic regions, and found that two audited housing projects lacked adequate infrastructure and public services, including public lighting and paved streets. Other homes had issues with electricity access and quality of concrete due to shortcuts taken by construction companies. At the core of these issues is the fact that MINVIH and BANHVI do not perform any building operations on their own; all their housing projects are run through intermediary construction companies. While in theory this should save the government money and allow for more streamlined housing construction, in practice this has at times resulted in lack of competition and an inability to direct funds where they are most needed. “Private companies have built every house in this country in the last decade," Mesalles told TBY. “At this point, some of the construction companies are in a comfort zone and do not want to change." The challenge for these agencies moving forward will be to form productive alliances with private construction firms, allowing for efficient and well-structured construction that targets needy populations. Recognizing that changes need to take place, MIVAH and BANHVI have recently simplified the paperwork needed to qualify for a housing bond, allowing families to fill out a form at a single authorized location instead of visiting multiple institutions to get the required documentation. The hope is that this will help MIVAH increase the number of recipients, allowing it to meet the government's goal of 15-20% growth in housing assistance services per year. This would mean serving 11,500-12,000 families a year—a tall task, but one that MIVAH believes it is up to. The continued health of Costa Rica's lower-income communities lies in the balance.

Adequate housing for the poor is of additional importance in Costa Rica because of the risk of environmental disaster. Landslides and flooding as a result of heavy rain have been a repeated issue in recent years, and the poor bear the brunt of these disasters, since they are often in poorly constructed houses outside of city limits. Costa Rica's government has clashed with residents who refuse to leave homes at risk of landslides, and Mesalles recognizes that the solution to the problem is ensuring that all Ticos have high-quality housing away from at-risk areas. “Some of the houses built in the past were very badly located outside of cities and towns," he told TBY. “We need to build houses and apartments closer or inside [urban areas]."

Move away from lower-income housing, and the situation changes dramatically. Here, Costa Rica is experiencing a housing boom, its second since the turn of the century. In the early 2000s, growing international demand for vacation and second-home property in Costa Rica led to a surge in real estate prices both in San Jose and coastal resort towns. The global financial crisis that began in 2008 sent demand plunging and caused a corresponding drop in prices. By 2012, however, the market had begun to recover, and this only strengthened in 2013, with purchasing activity rising 14% over the previous year. 2016 saw continued acceleration; Costa Rica does not publish official housing statistics but one private housing site reported that San Jose prices increased by 6.2% from August 2015 to August 2016. As with the boom of the early 2000s, this recovery is coming largely off the strength of foreign investors lured to the country for its stable political environment and open trade policies. There are no restrictions on foreign property buyers in Costa Rica, and the government has encouraged inflows. The US is the single largest foreign purchaser, but there are a growing number of investors from Canada and Western European countries. Most of this new real-estate construction and demand is coming from high-rises in San Juan, which the government is promoting as being more environmentally friendly and better for the continued health of the urban area. Costa Rican officials are optimistic that the growing volume of foreign-owned investments will increase supply for middle-income Costa Ricans as well.

Outside of San Juan, continued development in Costa Rica's coastal provinces has spurred construction of luxury beachside developments for foreign investors. Guanacaste, for example, has seen an influx of foreign money after the 2002 opening of the Daniel Oduber International Airport and the construction of the USD400 million Península Papagayo project. International investors have been drawn to the region for its weather and well-developed tourist infrastructure, and construction of a number of luxury hotels and golf clubs have further strengthened the region's global ties. In the south, development on the coastline near the Panamanian border has been boosted by the construction of a new highway and the growing popularity of ecotourism.

The real estate market is well supported by low interest rates that have helped Costa Ricans of all income brackets acquire credit and housing. The benchmark on mortgage interest rates was at a low of 1.75% in August 2016 after several cuts in the past few years. Interest rates on housing loans were likewise down over 2015 numbers; as of May 2016, colon-denominated housing loans had an interest rate of 12.2% and 7.99% dollar-denominated loans. The total size of the Costa Rican mortgage market was 13.1% of GDP in 2015, a 10.6% increase from the year previous. However, industry participants and analysts worry that Costa Rica's continued fiscal deficits could end up having a negative effect on the lending market in the future; the country's total debt is over 45% of GDP and projected to increase further over the next few years.