Government approves local accommodation and coercive rental measures

The Portuguese Government approved its controversial forced rental policy for properties that have been empty for at least two years with no signs of utility payments.

It has done so despite a stream of criticisms from property, legal and business associations nationwide in what the President of the Republic has called a ‘poster law’ that is “unworkable from start to finish”.

In an interview with SIC TV on Thursday evening Prime Minster António Costa said he couldn’t “understand what all the fuss was about” and at a press conference held that afternoon he said: “The concept of an empty property has existed since 2006, and for coercive rental since 2014”, and added that he was “bewildered” at the “enthusiasm” of the subsequent debate that had ensued.

The Government has also approved the suspension of new licenses for Local Accommodation for tourism and sort-term visitor lets until 2030, as well as putting up the IMI property tax and the application of an extraordinary tax of 20% on new properties used for Local Accommodation.

The ‘More Housing’ package was under public consultation for almost one month and received 2,700 opinions, but despite heated debates and a raft of alternative suggestions, and proposals to tweak the measures, few changes have been made to the original proposals unveiled on February 16 and which will now pass to the President of the Republic to be ratified in law.

If President Marcelo Rebelo refuses to pass the measures into law, the Government could send the matter to the Portuguese Constitutional Court, but given its socialist leaning composition, it is unlikely the court’s judges will throw out the bill.

The most relevant concession the Government has made is to reduce the extraordinary property tax from the 35% initially proposed to 20% on properties used for holiday and short-term visitor rentals which are not individual apartments. Hostels and hotels are not affected.

The approval has led to suggestions that the Government has introduced the proposed law under pressure from the powerful hotels lobby in Portugal which doesn’t like the competition and has agreed that its revenues have been eroded, with criticisms particularly from operators of three and four star hotels.

On the other hand, the State says I will make empty public properties available to private landlords for rental.

It will also provide a line of financing to landlords to encourage renting out their properties at affordable prices. This particular policy is aimed private real estate developers.

The Government announced that it would hand over empty properties owned by the State within three months (90 days) while the rental subsidies of €250 million will be made available to developers to provide an incentive to develop affordable housing for rent.

The State has also pledged that it will pay the rents of tenants who have defaulted on their payments after three months of non-payment in situations where families have fallen into extreme hardship.

The Government has also confirmed the end of the Golden Visa programme, although measures are still up for debate in the Portuguese parliament where stiff opposition is expected.

And in the SIC TV interview last night, Prime Minister António Costa brushed aside criticisms by saying: “The plan is very complete and integrated to meet a core need for families to have access to housing at affordable prices, a problem that has become dramatic for the middle classes and very difficult for young people”.

But the Prime Minister didn’t seem to know the number of houses that would be made available at affordable rents since no inventory has been drawn up, either via new build or the renting out of existing properties saying: “we can’t forecast this yet”.

Instead, he said that the aim was to provide a “sufficient number of properties for those who needed them”.

A stumbling block to the coercive housing policy is that municipal councils charged with the task of drawing up lists of properties that are empty for at least two years aren’t keen on the headache it will cause either administratively or with landlords, many of which may not even be in the country and would have to be served with the appropriate papers.

There are also fears that some particularly left-wing dominated municipal councils might use a rather liberal and over-zealous interpretation of the law to effectively attempt a Soviet-style appropriation of properties.

In his response to critics that the Government had taken a unilateral decision he said: “I did what I had to do. There have been criticisms that I thought were reasonable, others that were not, the debate goes on.

And as for criticisms from the President of the Republic and whether he would not pass the housing package into law, Antonio Costa said: “I wouldn’t like to comment on what other sovereign bodies might do, least of all influence them. I am doing what I can do. I’m seeing a lot of people saying that housing is very expensive, but I’m not seeing many coming up with solutions. The Government has provided solutions”.