May 30, 2023

Portugal's New Housing Program - Mais Habitação

Article by
Gonçalo Roxo

The details of Portugal's groundbreaking housing program, Mais Habitação, and its potential implications. Stay informed about the evolving real estate landscape.

The real estate landscape in Portugal is undergoing a significant transformation. Over the past years, we have witnessed a deepening housing crisis, particularly impacting the younger generation, as they face increasing challenges in finding suitable housing options. Recognizing this pressing issue, the Portuguese government has taken a notable step forward with the introduction of the Mais Habitação program, approved by the Council of Ministers in late March. This program signifies a shift in the state's approach, as it seeks to actively intervene in the housing market to address the mounting concerns.

As a reminder, the program encompasses a series of measures designed to address five key strategic objectives:

  1. Increasing the housing supply on the market by converting commercial spaces into residential properties.
  2. Streamlining licensing processes in the construction sector to facilitate faster and more efficient development.
  3. Promoting growth in the rental market to provide viable housing options for individuals and families.
  4. Combating speculation by phasing out the Gold Visa program.
  5. Offering support to families facing rising interest rates and high rental costs.

These strategic axes form the foundation of the program, aiming to tackle the housing crisis and create a more accessible and sustainable housing market in Portugal.

The proposed measures are currently pending a vote by the political parties in parliament. In a scenario where the Socialist Party holds an absolute majority, it is likely that these measures will be adopted, possibly with certain adjustments.

If you are an investor or have aspirations of becoming one in the future, it is crucial to familiarize yourself with some of the potential measures and their potential impact on you. Understanding these measures will help you navigate any forthcoming changes and make informed decisions regarding your property investments.

The Golden Visa program is coming to an end, but there is still a provision for its extension.

Applications that were already in progress at the SEF (Foreigners and Borders Service) or undergoing pre-screening at the municipalities are being processed under the regime for entrepreneurial immigrants.

Existing visa holders have the option to extend their visas. Initially, the government intended to mandate investors to either rent properties on a long-term basis or obtain permanent residency in the country. However, following feedback from industry professionals, there have been revisions. Golden Visas are no longer classified as residence permits but as permits for entrepreneurial immigrants, and their renewal is contingent upon the ongoing entrepreneurial project meeting specific requirements. Nonetheless, the regulations regarding the length of stay remain unchanged, allowing for a minimum of seven days per year and 14 days every two years.

The rental market is poised for change, with potential implications for landlords and property owners.

If you currently own apartments in the rental market, it's important to note that new regulations are being proposed, although they have not yet been formally enforced. These regulations may impact your rental operations and obligations as a landlord.

In terms of rent adjustments, it's essential to be aware that a limit of 2% applies to any increase in rental value for properties that have been on the market within the past five years. This limitation pertains to the incremental price increase compared to the previous rental price.

While these regulations are not yet legally binding, staying informed about potential changes in the rental market will help you navigate any future adjustments and comply with any forthcoming legal requirements.

On the flip side, if your property is currently occupied, the government has outlined several potential scenarios:

  1. The state may opt to rent your property and subsequently offer it for rent at a maximum expense rate of 35%. This arrangement provides an advantage for you as the landlord: the individual renting the property from the state is exempt from paying IRS or IRC on the rental value.
  2. Alternatively, you have the option to sell your property to the state. The state would then make it available on the market at an affordable rental rate. In this case, as the property owner, you would also benefit from an exemption through IRS.

Once the measures of the Mais Habitação program are approved in Parliament, they will proceed to Belém, where the President of the Republic will officially adopt them. Our team of property advisors will closely monitor the parliamentary discussions to gain insights into how the market may be affected by these changes.

Rest assured, we will continue to keep you informed about any developments and their potential impact on the real estate market. Our dedicated advisors are committed to navigating these discussions and providing you with the latest updates to help you make informed decisions regarding your property investments.

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