What changes with the new housing measures in Portugal?

The latest Portuguese government, led by Prime Minister Luís Montenegro, took office on April 2, 2024. This government presents a plan called Construir Portugal, which includes 30 measures aimed at reformulating the housing sector in the country to address one of Portugal's greatest deficiencies.

This strategy has come into effect in recent days and aims to encourage housing supply, with a special focus on young people, to counteract the inactivity of the previous Portuguese government in this sector, according to the current Prime Minister. The thirty measures of the "Construir Portugal" strategy are divided into six areas of action, namely:

1. Legislative simplification;
2. Encouraging housing supply;
3. Promotion of public housing;
4. Restoring confidence in renting;
5. Promoting youth housing;
6. Ensuring housing accessibility.

Each of these areas signifies a range of challenges that the country has encountered and pledges to enact effective solutions for. We'll explain point by point what they mean and how they will become part of the lives of the Portuguese.

Legislative simplification:

• Now, when applying for a housing loan, you can choose a different insurance provider than the one preferred by your bank. This measure aims to promote better competition among insurance companies, thus benefiting the market.

• Legislation aimed at streamlining the real estate sector, known as Simplex Urbanístico, implemented in early 2024, has now been reviewed, deepened, and improved.

• A new Construction Code is set to be approved, representing a collaborative effort among various entities associated with this sector. Within three years, new guidelines will be devised to set forth regulations and modernize existing ones, including some that trace back to the 1960s. Also planned is the creation of a digital platform that will allow for automatic and easily accessible checks for professionals in this field.

• The Building Information Modeling (BIM) methodology will be implemented. This methodology, already widely used across Europe, involves software that serves as a database containing all the pertinent details for a construction project, and also creates 3D models, informing about costs, strength, or the type of material required. This method further facilitates communication among professionals involved in the project and ensures greater speed in building and renovating buildings.

• The notion of controlled costs and affordable rents will be refined to ensure that housing expenses are genuinely equitable for individuals across various regions and timeframes. This measure will help create a more stable and enduring real estate market.

• The Extraordinary Contribution on Alojamento Local (CEAL - Contribuição Extraordinária sobre o Alojamento Local), which was introduced in October 2023 by the previous government, will be repealed. Alojamento Local licenses will no longer expire and can be transferred between owners. The calculations for the obsolescence coefficient will be revised, granting municipalities greater decision-making authority.

• The Housing and Urban Rehabilitation Institute (IHRU - Instituto da Habitação e Reabilitação Urbana) Portal will be established to make the tracking of applications more transparent.

Photo by Tom Rumble – Unsplash

Encouraging housing supply:

• The Government will make publicly-owned properties available for housing with affordable rents, with this measure being implemented through public-private partnerships.

• A semi-automatic legal regime will be created, meaning a law that will facilitate the use of vacant or uninhabited public properties for housing projects proposed and executed by municipalities and, if necessary, in partnership with private entities.

• There will be an amendment to land legislation, allowing rural land to be used for the construction of sustainable housing with controlled costs, intended for affordable rental or accommodation for professionals such as teachers, security forces, agricultural workers, industrial workers, or those in the tourism sector.

• A study will be undertaken to establish new urban hubs aimed at releasing pressure in urban areas. These new hubs will be designed with sustainability at the forefront and should be in harmony with transportation infrastructure.

• Implementation of a system whereby housing projects with controlled costs, affordable rent, or temporary accommodation will be eligible for benefits. This system will enable additional construction in designated areas, thereby increasing building density.

• The government will provide credit for cooperative construction through the allocation of public land.

• Establishment of credit lines to promote Built to Rent.

• Reduction of VAT to the minimum rate of 6% on rehabilitation or housing construction works, with a limit on this benefit based on the price.

• The agreement between the government and construction sector agents is aimed at increasing construction capacity through the industrial processes implementation, and the recruitment of more local workers.

Photo by Lucho Renolfi – Unsplash

Promotion of public housing:

• 25,000 houses from the Recovery and Resilience Plan (RRP) will be made available, with full responsibility lying with the local councils.

• Additional financial support will be extended to other eligible housing candidates that did not receive funding from the RRP.

• There are plans to strengthen the promotion capacity of the Housing and Urban Rehabilitation Institute (IHRU) through public construction aimed at the Affordable Rent program.

Restoring confidence in renting:

• The government has repealed forced leasing, which penalized private property.

• Repeal of the Mais Habitação measure, guaranteeing and replacing the State as the tenant.

• An investment contract will be created for Built to Rent and Available to Let.

• The government aims to rectify measures taken over the past eight years to restore flexibility to the rental market.

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Promoting youth housing:

• Young people will have the State's guarantee to obtain bank financing for their first home purchase.

• Those under 35 will be exempt from paying IMT (Property Transfer Tax) and Stamp Duty on their first property purchase up to the 4th IMT bracket, i.e., up to 316 thousand euros.

• An Emergency Programme for Student Accommodation will be established.

• Implementation of the National Housing Plan 2025–26 will provide over 18 thousand student beds.

• The Porta 65 rental support program will be reviewed to better align with the economic reality of young people. The exclusion regarding the rent limit will be eliminated.

Photo by Simon Maage – Unsplash

Ensuring housing accessibility:

• The government will simplify and streamline rental support programs, eliminating their expiration.

• A set of rules will be established for the transition from supported rent to affordable rent, ensuring the continuity of financial assistance.

The “Construir Portugal” program aims to provide immediate and urgent solutions to the housing crisis experienced in Portugal in recent years. The current Prime Minister believes this will be a commitment of all parliamentary group members and, simultaneously, of each municipality.