The Third Path for Housing in Costa Rica

For years, we have debated the country’s major urban challenges in these pages. We have addressed and put forward proposals on mobility, land-use planning, and the urgent need to transform our cities into more human, sustainable, and competitive environments.

However, there is a common thread that connects all these discussions—and one we now have the opportunity to address with unprecedented depth: housing.

The housing deficit is not a problem confined to our borders; it is one of the greatest challenges in global urban development. From Europe to Latin America, cities face the same paradox: more and more people work in urban centers, yet fewer and fewer can afford to live in them.

Costa Rica is no exception. According to the Federated College of Engineers and Architects (CFIA), the country carries a quantitative deficit of 145,000 homes. However, the real crisis is qualitative: research from the University of Costa Rica indicates that more than 750,000 households face deficiencies related to deterioration, overcrowding, or inadequate conditions.

The most revealing figure, however, is the market distortion: 90% of real estate supply is aimed at a segment that represents only 30% of the country’s households.

Put simply, most Costa Rican families cannot find housing options that match their economic reality. While real demand is around 30,000 units per year, the country builds between 23,000 and 24,000, according to data from INEC. To close this gap, at least 35,000 homes would need to be built annually over the next two decades.

But the key question is not just how many homes to build.

The question is where, how, and for whom we build our cities.

For decades, urban growth in the country has expanded toward the periphery. Thousands of families are forced to live farther and farther from centers of employment, education, and services. This dynamic fuels urban sprawl, increases commute times, and deepens territorial segregation.

In other words: the housing problem is also a mobility problem.

Costa Rica has developed valuable tools to address part of this reality. The Family Housing Subsidy (Bono Familiar de Vivienda) has allowed thousands of families to access homeownership. However, the system has a structural gap: it works well for lower-income households and for those who can access the traditional real estate market, but leaves out a broad middle class that neither qualifies for subsidies nor can afford to take on debt to buy a home. Additionally, the resources allocated to subsidies have historically been insufficient to meet the scale of the problem.

This is where a largely unexplored opportunity emerges.

During the pandemic, as part of economic reactivation roundtables, we participated in a discussion that generated a proposal worthy of greater attention: developing vertical, urban, affordable rental housing through public-private partnerships (PPPs).

The idea is simple, yet powerful.

The State owns strategically located urban land—much of it well-positioned and with existing infrastructure—that is currently underutilized and even generates costs for institutions. Under a PPP model, the public sector could contribute land and define affordability criteria, while the private sector finances, builds, and manages rental housing projects over a defined period.

This would expand the supply of housing in well-connected areas, reduce land-related costs, and attract private investment into projects with stable long-term returns. It could even open new financing opportunities through capital markets, channeling resources from institutional investors such as pension funds.

Moreover, this model could pave the way for the State or local governments to gradually develop a stock of rental housing, allowing units to be allocated according to households’ socioeconomic realities. Having this type of tool would help prevent urban value appreciation from once again displacing lower-income families to the periphery, reproducing the cycles of segregation seen in many cities today.

These types of policies have been successful in cities such as Vienna and Singapore.

But the benefits go beyond housing.

These projects can help revitalize underused urban areas, strengthen public transportation, and curb uncontrolled urban sprawl. They also create opportunities to promote new urban design standards, incorporating high-quality public spaces, green infrastructure, and solutions that enhance cities’ resilience to climate change.

This point is not minor. Recent studies indicate that a significant portion of the country’s housing stock is vulnerable to floods, landslides, or extreme climate events. Thinking about the housing of the future also means designing it with climate adaptation criteria, better water management, increased urban tree coverage, and spaces that contribute to community well-being.

So why haven’t we made more progress in this direction?

Part of the answer lies in institutional inertia. For decades, public policy has focused almost exclusively on promoting homeownership. At the same time, the management of public land is fragmented across multiple institutions, and the country still lacks financial instruments that facilitate large-scale rental housing development.

However, the current context opens a window of opportunity.

Costa Rica has regulatory frameworks that allow for the exploration of public-private partnership schemes, a sophisticated financial system, and a private sector willing to innovate in new urban development models.

For this reason, it is urgent to reactivate these types of working groups where all stakeholders come together.

We offer the accumulated knowledge of the team that participated in this initial model, including Portafolio Inmobiliario from the private sector; Capital & Advice in financial modeling; the real estate funds of BCR and Banco Nacional; as well as INVU, MIVAH, BANHVI, the Costa Rican Banking Association, and legal allies such as the firm Zürcher, Odio & Raven.

These types of coalitions are the viable path to completing a National Inventory of Underutilized Public Land, proposing specific financial vehicles that provide security to investors, and driving the necessary regulatory reforms.

If Costa Rica manages to align public land, private investment, and a long-term vision, it will not only be able to close its housing gap. It will also prevent cities from once again pushing out those who need them most—and, in doing so, begin to build more inclusive, resilient, and sustainable environments.

We have everything we need to make it happen. Let’s take the step.