Everything we know so far About the Measures Taken by the Portuguese Government to Tackle the Housing Crisis

This Thursday, 17 February 2023, in a press conference, the Portuguese Prime Minister António Costa announced his new plan for housing in Portugal to the country. Several points stand out which we’d like to describe in further detail here. 

COMMERCE AND SERVICE PROPERTIES CAN BECOME HOUSING WITHOUT REQUIRING A CHANGE IN LICENSE 

The Government will allow an automatic change of use of properties or land destined for commerce and services to be used for construction or housing, if the development is for the long term rental market.  

PUBLIC LAND MADE AVAILABLE TO PRIVATE DEVELOPERS AND COOPERATIVES 

The Government undertakes to make public land and buildings available to private developers and cooperatives for the development of housing intended for long term, affordable rent.  

MUNICIPAL COUNCILS TO STOP SPECIAL LICENSING  

With the aim of speeding up the licensing processes of housing, the Government will eliminate the need to approve various individual aspects of projects, and individual licences issued by the Municipal Councils. The approval of the project as a whole will now be the responsibility of those at the head of these projects. 

INTEREST ON LATE PAYMENT IN FAVOUR OF THE DEVELOPER FOR LEGAL DELAY BY THE AUTHORITIES 

There will be the payment of interest to the promoter when the deadlines for the issue of opinions or decisions by the municipalities or central administration expire. Thus the promoter will be entitled to receive late payment interest, charged by the entity that did not respect the deadlines. 

THE STATE GUARANTEES THE LANDLORD RENT AFTER THREE MONTHS 

The Government promises to assume responsibility for the tenants in case of non-payment of rents after three months, when the reasons for late payment will be investigated. These requests have to be registered in the National Renting Counter after three months of non-payment.  

EXEMPTION OF CAPITAL GAINS TAX IN THE SALE TO THE STATE 

The Government waives the payment of capital gains tax by owners who sell residential properties to the State, or to municipalities, regardless of the state they are in and for the market price. The aim is to increase the public supply of affordable rentals (tables per municipality and municipality defined by the State).  

MUNICIPALITIES WILL HAVE MORE FUNDS FOR COERCIVE WORKS 

The State will make more funds available to the municipalities so that they can impose and carry out works in a coercive way on uninhabited buildings, especially those that are in a poor state of conservation, in order to carry out construction where necessary and place the respective properties on the affordable rental market (tables per municipality defined by the State). 

PROHIBITION OF NEW AL LICENCES AND ONLY IN RURAL AREAS 

There will be no more AL licences except in municipalities in the interior of the country. Existing licences will undergo continuous assessment from 2030 and there will be an immediate tax increase.  

AL owners who transfer their property to the rental housing market will stop paying income tax on it until 2030. 

THE STATE WILL SUBLEASE VACANT PROPERTIES FOR FIVE YEARS 

The State wants to rent properties from private individuals to sublet them at a maximum effort rate of 35% of the household. This way, the State proposes to rent all the houses that are available on the market for five years to sublet them and assure that landlords pay the rents, even if it is in advance.  

NEW NORM FOR AFFORDABLE RENT FREE OF IRS, IMI AND IMT 

All landlords who put their homes on affordable rent (tables per municipality and municipality defined by the State) will no longer pay tax on the income from the property, but also IMI and IMT, if they buy properties for this purpose. In addition, all rehabilitation works for affordable housing (tables by municipality defined by the state) will also enjoy a significant reduction in VAT to 6%. 

END OF GOLD VISAS 

The special regime of residence permits launched in 2012 to attract foreign investment (ARI or Gold Visa) will end. The renewal of these visas will only happen if the property is destined for permanent residence, or if it is for rental for a period of no less than five years. 

NEW RENTS ARE LIMITED IN THEIR INCREASE 

New housing rental contracts which succeed contracts entered into in the last five years will be limited in their increase. This measure is aimed firstly at situations of termination of a previous contract in order to sign a new contract with a value superior to the one that would be given by the legal update. This limitation is based on the following calculation: 1st update not made in previous years, adding 3.43% and 2nd, adding 2% more, in line with the medium term inflation target presented by the European Central Bank. The measure will not cover new contracts for housing without reference to previous income. 

REDUCTION OF IRS ON RENTAL INCOME 

Thus the tax on property income will fall from 28% to 25%; the respective tax for contracts of 5 and 10 years will be from 23% to 15%; then the tax on contracts between 10 and 20 years will fall from 14% to 10% and, in contracts lasting more than 20 years, the rate to be applied will be 5% instead of 10% as it was. 

BANKING OBLIGED TO HAVE A FIXED RATE 

The banks will be obliged to have fixed-rate mortgage loan alternatives for their customers in Portugal.