Developers reject housing package.
The Portuguese Association of Civil Construction and Public Works Industries AICCOPN has rejected the Government’s More Housing package saying it will make the tax regime for the real estate sector “considerably worse” and “scare away private investment” in rental housing in what it calls a policy that “doesn’t make sense”.
The criticisms are in a report sent to the government on the back of the public consultation process which has been extended until this Friday. (March 24)
“We don’t understand why the government has introduced these measures if it wants to boost the housing market, increase housing stock and bring prices down” says AICCOPN president Manuel Reis Campos, who added that a policy for “a rental market had not been created, properties had not been built, or renovated in a decade” to that end.
The construction sector argues that the problem is a “lack of new properties” and that “the Government’s current public policy focus for a deep down and prolonged plan in the rental market in the way it was being done was “all wrong and completely misaligned”, “making a lot of waves but having no real impact”.
The report said that the package that had been presented had been “roundly discredited” and that the measures would only “undermine confidence and credibility”.
The Government’s ‘More Housing’ package contains various proposals that directly act on and effect real estate and development, and through which the Government aims shake up the sector and increase the number of houses available on the market.
It also plans to make a number of targeted alterations to the tax regime, one of them on the level of VAT levied on works carried out in the so-called Urban Rehabilitation Areas (URA); sweeteners that will now only be applied to doing up buildings in these areas, but not outside, and not including building new ones.
“This measure will certainly only cause a strong and undesirable pushback on investment in renovation works in a situation where there are almost half a million buildings needing renovation works”, states the AICCOPN.
Moreover, in the case of works already currently underway “this change will considerably increase costs” which will of course be “passed on to the final cost of the properties”. VAT is currently 6% charged on developers and builders who renovate houses in URA-designated urban areas.
In other words, AICCOPN says that the Government is now restricting the eligibility of tax benefits to developers that renovate buildings in these specific areas, effectively changing the definition of a 6% tax break on ‘urban rehabilitation’ (a more elastic term which could cover new build as well as existing buildings) to ‘renovation of buildings’ in the URA (just doing up old buildings in these specific areas).
According to tax expert Clotilde Palma who spoke to Journal de Negócios, there is no doubt that the Government will “restrict the scope whereby this reduced VAT rate is applicable to just one component of urban rehabilitation (the rehabilitation of buildings in URA areas) which doesn’t make sense, even more so when part of a More Housing package whose objective is to create housing offer”.
Photo: AICCOPN – ARR