Raising the Roof

The government’s controversial ‘More Housing’ proposals.

The government says that it has to address the shortage of affordable homes in many parts of Portugal, including the Algarve. Several of its proposed solutions are proving controversial and are set to meet with strong opposition and possibly challenges in the courts.

Prime Minister António Costa, when introducing his government’s proposed reforms, argued that they are necessary because, for many low-paid Portuguese families, housing has become unaffordable in many parts of the country. Prices and rents have been rising faster than incomes, putting homes out of reach. The effect is most dramatic in Lisbon, where property prices have risen from 1.300€ per square metre in 2015 to 4.800€ today. Rents in the capital rose by 37% in the last year. But many other areas, including the Algarve, have also seen large increases in both prices and rents.

Past government policies have contributed to the inflation in property values, not least the numerous measures taken over the years to encourage foreign investment in Portuguese property. While these measures succeeded in bringing in a large amount of foreign capital, they have clearly contributed to the property boom. Now the government is trying to switch direction by dampening down the foreign incentives and tackling the problem of under-used or empty properties.

Some of the proposed changes are not particularly controversial, for example:

Properties sold to the state are to be exempt from Capital Gains Tax
Planning laws will be changed to make it easier to convert commercial property into residential use
Local authority planning processes will be simplified
Properties made available for long-term rent will get tax exemptions, including lower income tax on the rental income
Rent and mortgage subsidies will be offered to low-income families

Then there are the controversial proposals, for example:

To stop issuing the Local Accommodation licences (Licenças de Alojamento Local) currently required for tourism rentals, and to make all existing licences expire in 2030, except in rural areas. After 2030, current AL licences will only be extended if they acquire local approval.
Condominiums are to be given the authority to decide, by majority vote, whether they wish to end Local Accommodation licences in their development.
Vacant properties can be taken over by local authorities and be subjected to a forced let. The government intends to order utility companies to tell the authorities if the annual consumption is unusually low. The government will then give the owner 100 days to arrange a let, and if they fail to do so, the government will make a forced let. Second homes are to be exempt from this measure.
Where councils deem a property to be overcrowded, they will be given the power to force the landlord to rehouse tenants in additional properties.
New lease contracts will be subject to statutory rent controls, limiting annual increases to inflation plus 2%.
The Golden Visa scheme, which grants EU passports to non-EU citizens in return for substantial capital investment in Portugal, will end. Existing visas will only be extended on proof that the property covered is a permanent residence. Currently, in the Algarve, the scheme operates in Aljezur, Monchique and Vila do Bispo.

From the list of proposed measures, it is easy to see why landlords and many in the tourism rental business are concerned. The government offered only a very short consultation period on the proposals, but even so, a number of organised lobby groups have sprung up determined to press for change to these proposals as they begin their passage through Parliament in the coming months.

Opponents are concerned that some of the powers are draconian and quite probably unconstitutional. So, some of this is heading for the courts, it would seem. Others argue that the state should be looking to bring its own empty public properties into use before seeking to take over private accommodation.

Prime Minister Costa argues that the right to property cannot override the right to housing. That is the proposition that will now be tested.

The website: Visa Guide.World is an excellent resource for those seeking comprehensive information on the Portugal Golden Visa program. It provides up-to-date details on the latest developments, as well as a step-by-step guide on how to apply for a visa.