The lack of affordable housing for the Portuguese has almost become a national emergency. Low wages make facing the gallop in real estate prices an impossible mission. Some recent studies show that the average selling price in Lisbon in 2022 exceeded that of Milan, Madrid or Barcelona, while the rental price was higher than that of the Spanish capital and only slightly lower than that of Milan. The government has decided to put an end to this with a package of measures that has revolutionized Portuguese housing policy over the past few decades, and is considering proposals for direct intervention in the market that socialist Prime Minister Antonio Costa has always shunned. In addition, the program of issuing residence visas to foreigners for investments in the country will be buried and new licenses for tourist housing will be banned, which some specialists cited as factors favoring real estate speculation and rising prices.
The most controversial initiative of the government plan is the forced renting of vacant apartments. The state can rent them out to sublet for five years and act as a real estate broker, charging the tenant and paying the owner. These rents must never exceed 35% of the core family income. The state takes over the unpaid rents so the owners always get them and negotiates a solution to the debt with the tenant, which in the worst case can include eviction. The exceptions and details of this initiative are still being outlined in the public and parliamentary consultation process now beginning, although no major shocks are expected given that the Socialist Party governs with an absolute majority. The Council of Ministers is expected to approve the final version of the measures in March, which will also include tax benefits for owners to encourage long-term rentals.
Public interventionism will also extend to new rental prices, which has not happened in Portugal since 1985, when legislation was enacted to liberalize them. From now on, a maximum increase limit will be set for new residential leases, which will be linked to both the development and the inflation forecasts. This is to prevent rents from skyrocketing and forcing tenants who cannot afford them to move out.
In an interview with TVI, Prime Minister António Costa justified this change in housing policy by finding a “balance” between the needs of the population and economic development. Because one of the decisions directly affects tourism, a capital sector for the Portuguese economy. The government will ban new tourist floors across the country, with the sole exception of rural projects that benefit small populations. “Tourist housing has had many positive effects in revitalizing our cities, but they also have negative effects such as rising prices,” explained Costa. Also, the license will be reviewed for those currently active in 2030.
At the end of December there were 108,523 officially registered holiday rentals in Portugal. The rehabilitation of the historical centers of Lisbon and Porto, which have been in a state of decay for decades, has been one of the positive contributions to the development of the new tourist rental platforms, but has also led to the displacement of local residents and urban gentrification. In some districts of Lisbon almost progress towards specialization has been made, with 60% of rental housing dedicated to tourism. These excesses were corrected with temporary moratoria in saturated areas and some rulings such as a Supreme Court ruling allowing a veto on tourist housing in residential buildings.
With its ban, the Portuguese government trusts that “the return of accommodation that is now touristy to the real estate market” will be encouraged, said António Costa on Thursday at the end of a council of ministers devoted exclusively to housing and the package of measures approved , which includes costs of 900 million euros.
A Decade of Golden Visas
Another major innovation is the end of the golden visas that grant residence permits to those investing in real estate, starting businesses or transferring capital to Portugal. In practice, since its entry into force in 2012, it has mainly been used by foreigners who obtained Portuguese residency in exchange for buying their own home: they obtained 92% of “gold visas”. Chinese citizens have been the most active investors, benefiting from nearly half of the more than 11,000 visas issued in a decade.
Organizations like Transparency International and left-wing parties like the Portuguese Communist Party and the Bloco de Esquerda have been calling for the abolition of this measure, which was put in place to try to replace the vacant housing stock caused by the great economic crisis that began in 2008, for years. “The program has already performed the function it was intended to perform,” Costa said a few months ago when he first announced his hiring was under consideration. Spain also has a similar program of issuing residency visas in return for attracting investments.
The move by the Portuguese executive, which had previously defended fiscal policy stemming from the right to attract foreign money, drew sharp criticism from the opposition and business groups. The Social Democratic Party (PSD, centre-right) has called the plan “statistical” and “abusive”, while the Local Accommodation Association of Portugal considers it “very serious”. “These measures create enormous uncertainty for private investments and make them unfeasible,” it said in a statement.
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