Slow Growth as U.S. Virgin Islands Recover From 2017 Hurricanes
HUD’s Comprehensive Housing Market Analyses provide information on changes in local economies, housing markets, and populations and provide 3-year forecasts for demand in the area. This article is part of a series that sheds light on the content of these analyses.
The U.S. Virgin Islands are a U.S. territory located in the Caribbean Sea approximately 40 miles east of Puerto Rico and have an estimated population of 101,900. In September 2017, the U.S. Virgin Islands were struck by hurricanes Irma and Maria. More than half of all households in the territory reported damage from the hurricanes, and more than 10 percent reported severe damage. Although recovery is ongoing, conditions in the U.S. Virgin Islands have been improving. A recent Comprehensive Housing Market Analysis on the U.S. Virgin Islands highlighted the economic and housing market activity in the territory.
The 2017 hurricanes weakened the economy of the U.S. Virgin Islands, but it has been recovering slowly. The hurricanes caused an estimated $10.8 billion in damages, and in their aftermath, airports were closed for 2 weeks and seaports were closed for 3 weeks. Major roadways were heavily obstructed, and 95 percent of the territory was without power. The widespread damages forced many major resorts to close and some have yet to reopen, including the Caneel Bay Resort, which was St. John’s largest employer before the hurricanes. Recovery efforts were bolstered by $459 million in federal funding in late 2017 as well as $1.9 billion in HUD Community Development Block Grant Disaster Recovery funds. Wastewater services were restored within 30 days, and power was restored to residents by March 2018. Recovery work remains, however; many healthcare facilities remain closed or only partially open, and many schools, which have reopened, still need work.
From July 2018 to July 2019, nonfarm payrolls increased by 400 jobs, or 1.2 percent, after declining 11.7 percent during the previous 12 months. During this period, the unemployment rate averaged 6.6 percent, a significant improvement over the 12-month period ending in July 2018.
Government is the largest employment sector in the U.S. Virgin Islands, accounting for 31 percent of the workforce. The territory’s two largest employers are in this sector: the government of the U.S. Virgin Islands and the federal government, employing 9,700 and 900 people, respectively.
The mining, logging, and construction sector experienced the territory’s largest increase in employment, rising by 300 jobs, or 13.6 percent. Most of this increase was in the construction industry, fueled by ongoing recovery efforts following the 2017 hurricanes. The manufacturing sector was the area’s fastest-growing employment sector, increasing by 20 percent, or 100 jobs.
These employment gains, however, were offset by job losses in other sectors. The information sector saw the sharpest decline, decreasing by 14.3 percent, or 100 jobs, and the leisure and hospitality sector experienced the largest overall employment loss, decreasing by 8.3 percent, or 400 jobs.
The leisure and hospitality sector employed 13 percent of the territory’s workforce during the 12-month period ending in July 2019. Tourism is a major part of the economy in the U.S. Virgin Islands, but the 2017 hurricanes significantly affected the industry. Despite the hurricanes and their aftermath, nearly 2 million visitors came to the island in 2018, accounting for $1 billion in revenue.
Over the next 3 years, employment growth in the territory is expected to average 2.2 percent annually. Growth will come from increases in tourism as hotels and resorts reopen as well as from infrastructure development.
The sales market in the U.S. Virgin Islands is balanced, with an estimated vacancy rate of 3.4 percent. The hurricanes reduced the housing inventory, limited the available supply, and increased demand for secondary and seasonal homes, causing home sales prices to increase from July 2018 to July 2019. During this period 380 homes were sold, a 31 percent increase from the previous year. Home sales prices also increased by 10 percent during this period.
The rental housing market is tight, with an estimated vacancy rate of 6.5 percent, due to the influx of recovery workers in the territory as well as the opening of Limetree Bay (formerly Hovensa), a petroleum refinery in St. Croix.
Over the next 3 years, demand is estimated for 800 new housing units and 940 rental units. The demand is expected to come from population growth and improved economic conditions. For more detailed information on the U.S. Virgin Islands, see the Comprehensive Housing Market Analysis on the territory.