Government unveils new reworked housing policy

Portugal’s new centre-right Democratic Alliance coalition government has unveiled a 30-measure programme with defined deadlines to tackle the country’s affordable housing crisis.

It has to be first stressed here that a considerable percentage of the Portuguese population, while suffering the effects of cost-of-living inflation and higher mortgages, own their own homes (75%) and overdue mortgage and default rates are currently low (around 6%), while a considerable proportion have been paying down some of their mortgages since the pandemic.

The crisis is affecting primarily young people who are unable to get on the housing ladder, the lower middle classes, low income families, and those living in rented accommodation in Lisbon and Porto who have suffered increasing rents since rent controls were, in some cases, curtailed in new contracts, bringing rents in line with market prices.

So on Friday the government announced its ‘New Strategy for Housing’ that aims to provide solutions to the current difficulties in buying or renting a house at affordable rates and has sought to improve the ‘More Housing’ package introduced by the previous PS socialist government in February, 2023 and came into force in October that year.

The main measures are:

New build to rent

The government will advance with plans to unblock funds for 25,000 new homes (at a cost of €1Bn) as part of the Recovery and Resilience Plan (RRP).

It will change the Land Law (The Portuguese call it the Law of the Soils) which will allow rural land (not currently used for farming) for sustainable housing projects for affordable housing for rent, housing at controlled costs, or making housing available for teachers, the police, farm hands, industrial workers, and for those working in tourism.

Lisbon City Council had already transferred some municipal land and buildings for housing cooperatives on condition that they guarantee that part of the units are rented at controlled costs, in accordance with the rules of the Affordable Income Programme. (AIP)

Affordable housing for young people

For young people, to help them have an independent life and not have to live at home with their parents — a problem that has led to immigration overseas in search for higher wages — the ‘New Strategy for Housing’ will exempt the payment of IMI municipal property tax (council tax) and Stamp Duty (Imposto do Selo) for young people up to the age of 35 on properties worth up to €316,000.

The government will also stand as a guarantor for mortgages for young people when they purchase their first house to help them get on the housing ladder, as well as reworking the Porta 65 programme taking into account the economic realities young people face and doing away with exclusions on rent limits. The Porta 65-Jovem programme is a young peoples rental incentive programme for 18-35 whereby part of the rent of a house will be paid by the government to couples, individuals, or groups sharing a house.

Regarding students, an Emergency Plan is to be introduced as part of the National Accommodation Plan 2025-2022, which will provide 18,000 beds in houses or student accommodation.

Axing Coercive rental

Within 10 days the government will scrap the coercive rental policy and instead provide tax incentives to encourage property owners who do not actually live in their properties, or spend hardly any time in the property, to put them on the rental market thereby restoring the right to property.

Local Accommodation

Within 10 days the government will also scrap the Extraordinary Contribution on Local Accommodation (Short-term self-catering tourist lets), as well as restoring licences that had been frozen, while allowing local councils to manage LA regulations with flexibility according to different local realities.

Within 120 days the government will advance with the creation of a IRHU Site (Institute of Housing and Urban Rehabilitation) so that applicants and local government planning officials can monitor application processes for projects, particularly regarding refurbishment and modernisation of existing properties into apartments and other types of accommodation.