The government approved a series of housing measures in a Cabinet meeting on Thursday, which Prime Minister Luís Montenegro described as “bold and ambitious” but assured it is “a project with a head, trunk, and limbs.”
“We have taken very bold and ambitious measures in the housing sector, [but] we want the country to understand that what we are doing in the most diverse sectors, including this one, is the development of a project that has, as they say in good Portuguese, a head, trunk, and limbs,” stated Luís Montenegro during the inauguration of a student residence in Beja.
What will change?
1 – VAT reduced on construction for sale up to 648,000 euros and rents up to 2,300 euros
The Prime Minister announced the government will reduce the VAT rate to 6% for the construction of houses for sale up to 648,000 euros or, if for rent, with rents up to 2,300 euros.
Montenegro acknowledged that the reduced VAT for house rentals up to 2,300 euros might sound “a little high,” but argued it is “a maximum ceiling” aimed at covering house construction for families in high-pressure areas like Lisbon and Porto Metropolitan Areas.
2 – Increase in IMT for house purchases by non-residents
The Prime Minister announced an increase in the Municipal Property Transfer Tax (IMT) for the purchase of homes by non-resident citizens in Portugal, excluding emigrants.
There was also an announcement of an exemption from the additional payment to the Municipal Property Tax (IMI) for homes rented out up to 2,300 euros.
Among other measures, the government approved increasing IRS deductions for rental expenses to 900 euros next year, then to 1,000 euros, reducing the tax for property owners charging moderate rents from 25% to 10%, a 6% VAT rate for housing construction with a sale value of about 648,000 euros, and a 6% VAT rate for rentals up to 2,300 euros.
3 – Government to support construction workers with temporary housing
The government will support construction sector workers with temporary housing, announced the Minister of Infrastructure and Housing. In statements to journalists, while the second Cabinet meeting on the housing crisis was still ongoing, Miguel Pinto Luz highlighted the need to “ensure decent living conditions” for construction sector workers.
4 – Government seeks to ease access to housing and construction credit
The Infrastructure Minister announced discussions with banks to ease access to housing credit and construction capital and that more housing measures will be presented by December.
“We are working with the Portuguese Banking Association, with banks, to find new products that ease access to housing credit for the Portuguese, but also to ease access to credit for those needing construction capital,” stated Infrastructure and Housing Minister Miguel Pinto Luz, in a statement to journalists, without allowing questions, while today’s Cabinet meeting was in progress.
5 – Creation of moderate rent: Ranging from 400 to 2,300 € (without municipal limits)
The government has also decided to end the affordable rent concept and create a moderate rent, with values between 400 and 2,300 euros, without municipal limits, to ensure transparency.
Infrastructure and Housing Minister Pinto Luz specified today that moderate rent ranges from 400 to 2,300 euros.
These values have no municipal limits, a situation that was “considered,” but the executive of Luís Montenegro decided to abandon it to be more transparent, explained Pinto Luz in a meeting with journalists, in Lisbon.
6 – Government boosts public guarantee for youth by 350 million
Additionally, the government approved an increase of 350 million euros in the public guarantee for home purchases by young people up to 35 years old, raising the allocable value to 1.550 billion euros, according to an official dispatch.
The dispatch signed by the Minister of State and Finance, Joaquim Miranda Sarmento, dated September 18 and published on Wednesday, determines an increase in the maximum amount by 350 million euros.
Banking has already assured it is willing to continue working with the government in implementing public policies after the 350 million euro increase in the guarantee for young people’s home purchases.
Banking assured today it is ready to continue working with the government in implementing public policies after the 350 million euro guarantee increase for young people’s home purchases.
Lusa | 19:48 – 25/09/2025
Reactions
The Civil Construction and Public Works Industrial Association (AICCOPN) stated the government’s measures to combat the housing crisis are positive but urged for their swift implementation.
“AICCOPN positively notes the government’s announcement of new measures to respond to the housing crisis. Although not yet familiar with all the initiatives announced […], it believes their implementation must be swift and effective,” it defended in a statement.
The Portuguese Association of Real Estate Developers and Investors (APPII) welcomed the VAT reduction to 6% for the construction of properties up to 648,000 euros.
“We welcome the measure of 6% VAT for construction nationwide, as well as for rental properties,” said the association’s president, Hugo Santos Ferreira, in a statement released today.
APPII views this announcement as a victory for starting to resolve “the systemic housing problem in Portugal.”
