The measures included in the housing package by the government of António Costa and the last Council of Ministers for Housing are diverse and cover different areas in this matter. The proposed legislation was launched in February 2023 and aims to provide a comprehensive response to the housing problem in Portugal. Several areas, such as the golden visa or local lodging, have been amended, as well as support for rents or support for the payment of instalments for housing loans. Several measures have dictated the future of housing in Portugal.

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How much will the new "Mais Habitação" package cost?

This new package is expected to cost around €900 million, which has already been included in the government budget. This is an estimate by the Minister of Finance, who added that the value of the rents and works included in these measures are not included in this figure.

When will the measures of the "Mais Habitação" programme come into force?

The programme, which aims to enshrine this human right, i.e., the right to housing for all, was adopted on 16 February 2023. It is a requirement for a dignified life and deserves the special attention of the Portuguese government, which faces many problems in this area. The measures of the "Mais Habitação" package were publicly discussed for a month and finally adopted on 24 March.

What are the objectives of the "Mais Habitação" programme?

The Council of Ministers approved the "Mais Habitação" programme, whose main objectives are to solve five housing problems in Portugal:

1. Increase the number of houses for permanent rental and increase accessible rental;
2. Increase the number of properties for residential purposes;
3. Simplify licencing procedures;
4. Combating real estate speculation;
5. Helping families to pay rent and mortgage instalments.

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The Mais Habitação programme comprises 16 measures, which are listed below:

1. New applications for golden visas are frozen.
2. The state will pay rent in the event of three-month payment arrears.
3. Mandatory rent regulation for vacant houses.
4. Limiting the amount of rent in new rental contracts.
5. The obligation of banks to provide a fixed interest rate.
6. The tax office's autonomous tax rate (IRS) on rents is reduced from 28% to 25%.
7. Properties that continue to be housed under the local lodging regime pay a special contribution.
8. Properties leaving the local lodging regime by 2024 will be exempt from paying IRS on rent until 2030.
9. Prohibition of new local lodging licences.
10. Property sales for mortgage repayment will be exempt from capital gains tax.
11. Bonus on housing loan instalments for families affected by increased interest rates.
12. Simplification of municipal approval procedures and penalisation of delays in issuing appraisals.
13. Credit line for municipalities to carry out rehabilitation works on vacant properties.
14. Land, commercial and service properties can be converted into housing without changing the permit.
15. Support of up to 200 euros for families in emergencies.
16. Homeowners who sell their houses to the state or municipalities are exempted from paying capital gains.

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What do the individual measures of this "Mais Habitação" programme mean?

1. Frozen golden visas

Golden visas will be revoked, and those who have already received them will be extended only if the investment is in the owner's or a descendant's permanent residence. The visa can be extended if the property is rented out.

2. Rent arrears

To help the rental market, the government pays rent three months late instead of the tenant. Therefore, all eviction requests received by the National Landlord Office after three months in arrears are paid by the state to the landlord. The state, in turn, assumes the role of the landlord and collects the rent in arrears from the tenant. If the tenant lacks the social circumstances to pay the rent, he or she is assisted in paying future rent or rehousing. If the tenant does not pay the rent without justification, the state will evict him.

3. Compulsory letting of vacant houses

Vacant houses are those that have not been occupied for more than a year and can be proven by the absence of contracts with water, electricity, or other utilities, or even if there is only a minor consumption. The regulation of compulsory letting of vacant houses is another measure of this package to relieve the rental market. It is an addition to the existing measure based on the tax burden on vacant homes. The state or municipality is responsible for proposing to the owner, to which the owner can respond within ten days. The state pays the rent to the landlord and in return collects the rent from the tenant resulting from a sublease. “Forced tenancy” was one of the most controversial government measures.

4. Limitation of the value of rents

This measure concerns only new leases and aims to limit the value of rents by setting criteria for this purpose. The rents in the new contract may not exceed the value practised in the previous contract for the same property, increased by a coefficient of 1.02". For new apartments that have never been rented out for residential purposes, there is no upper limit on the rental value. Before 1990, rents were frozen. Another fresh feature of the residential rental market is the tenant's option to report the contracts to the tax authorities if the owners do not.

5. Submission of fixed rate offers by the banks

Banks will be required to submit mortgage portfolio offers that include a fixed interest rate. Until now, banks were not obliged to present this solution in the loans, as they usually offered variable interest rates that fluctuate over time according to Euribor and spread.

6. Reduction of the autonomous income tax rate

This measure lowers the autonomous tax rate on rents by three percentage points, from 28% to 25%. For several years, this rate stagnated at 28% for owners who did not want to combine their income. Longer-term leases will benefit even more as a result. For example, the IRS rate will be reduced from 23% to 15% for tenancy agreements lasting ten to five years and from 14% to 10% for agreements lasting ten to twenty years. Contracts with a term of more than 20 years will see a 10% reduction to 5%.

7. Special contribution to local lodging

Property owners who keep their properties in the local lodging regime must pay a special contribution, the proceeds of which go to the IRHU (Institute of Housing and Urban Rehabilitation) to fund housing policies. The government hopes to encourage owners to convert their local lodgings to the housing regime. Owners who complete this transition by 2024 will be exempt from IRS taxation until 2030.

8. Prohibition on granting new local lodging licences

The ban on new local lodging establishments is another measure in the Mais Habitação package that has caused controversy in public opinion. Until the last moment of this ban, there was a rush for licences for local lodging establishments. The government then decided to prohibit the issuance of new local lodging licences in urban areas. In Portugal inland, there is still an incentive for rural lodging to boost the economy of these regions. Current licences for local lodging establishments in urban areas will be reassessed in 2030 and every five years after that.

9. Selling property to repay a bank loan

Anyone who sells their home to pay off a mortgage will be exempt from paying capital gains tax in the future. This exemption only applies to those who sold their home at the beginning of 2023 and extends until the end of 2024. After the sale, you must use the money to repay the loan within three months.

10. Subsidy for mortgage loan instalments

This measure is intended to assist families who are having difficulty making mortgage payments. It is a 50% interest rate reduction for home loans up to €250,000 for families whose financial burden has increased due to interest rate increases. This measure applies only to families earning up to €38,632 per year. For the time being, the subsidy is valid until the end of 2023, but the government admits that it can be extended until next year if interest rates do not normalise. The maximum limit for this support is 720 euros per year or 60 euros per month.

There are three mandatory conditions to receive this support:

• A variable interest rate must have been agreed upon, or if a mixed rate, it must fall within the variable interest rate period;
• The original loan amount must be equal to or less than 250 thousand euros;
• The instalments must have been paid.

11. Simplification of licencing

This is another controversial measure, but it promises to speed up and shorten the time required for municipal licencing. Architectural projects will now be licenced based on the responsibility term of the planners, and in case of delays in issuing opinions, public entities will be penalised.

12. Credit lines for municipalities

Coercive works on vacant properties are not new, but municipalities have historically lacked the funds to carry out these measures. Therefore, the government has granted municipalities a credit line of 150 million euros to enable them to carry out the work to create more housing.

13. Land and commercial and service properties being used for residential purposes without a license

No change of use permit or land use plan is required to convert a land or commercial and service property into a residential property.

14. Up to 200 euros for needy families

The new multi-housing package also provides a maximum subsidy of 200 euros to support families who have to pay rent that exceeds 35% of their monthly income. This subsidy can range from 20 to 200 euros. It is granted automatically and within a maximum period of five years. This subsidy applies to contracts concluded with the Tax and Customs Administration by 31 December 2022. The rent value must not be higher than the Maximum Allowable Rent (RMA), and the housing type must be appropriate for the number of family members. The income of the housing unit must be equal to or below the maximum limit of the 6th IRS tax bracket.

15. Disposal of real estate to the state grants capital gains exemption

Property owners who decide to sell their properties to the state or municipalities are exempt from paying capital gains tax. The properties acquired by the state are then part of the supply of affordable rental housing.

The Portuguese government's actions were not unanimous, but they were designed to address the lack of housing and the difficulties that inflation was causing for Portuguese families. The results of these measures must be effective, according to Minister Marina Gonçalves, and in the coming months, we will be able to see their effects.