Forcing those who have empty houses to rent them out “is expropriation” and penalizing them with taxes “cannot be because taxes cannot be confiscatory”: so what do you do?

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There’s a proposal by Mariana Mortágua that has created a stir – so much so that the Left Bloc itself didn’t emphasize it outright. At issue are the empty houses whose owners don’t want to rent them – and it is a particularly intense discussion at a time when there is a great imbalance between supply and demand in the rental market.

Mariana Mortágua, besides defending a ceiling on rents with incentives for landlords, suggested that landlords should be “forced” to put vacant houses on the rental market. Faced with this, landlords and tenants agree that it is necessary to bring more housing to the market in the face of the crisis – they just have different ways to get there.

Despite the deputy’s position, the Bloco de Esquerda “does not have any concrete proposal at this moment”, the party tells CNN Portugal. But it does point to ways forward, and one of them already exists in several municipalities, including Lisbon – increasing the IMI for vacant buildings, which can become 12 times the normal rate.

Mariana Mortágua
Mariana Mortágua

“Even the Lisbon City Hall has defended these mechanisms, namely through the IMI, and there may be alternatives to encourage houses to be on the market,” adds the Left Bloc.

But this solution, for now, is not having any practical effects – that is, it has not resulted in more houses for rent in Lisbon, where it is estimated that there are more than 40 thousand vacant houses -, acknowledge both landlords and tenants.

“This IMI penalty was a total failure. A large part of the lack of confidence is due to the legal framework,” reacts Luís Menezes Leitão, from the Associação Lisbonense de Proprietários.

Woman traveling in Lisbon, Portugal
Woman traveling in Lisbon, Portugal

But if landlords see the bloquista intention as “absurd”, tenants find it meaningful. “The proposal is right and would help solve the problem of speculation. There were more houses and landlords had to lower values. It’s easy to force landlords to rent – just say that they’ll be penalized in fiscal terms,” sums up Romão Lavadinho, president of the Association of Lisbon Tenants.

However, this spokesman recognizes that in Lisbon the measure “is not enough” to solve the imbalance between supply and demand, with an impact on price increases.

The tax experts consulted by CNN Portugal also agree that the way forward is not to increase the IMI. “You can’t solve everything with taxes,” summarizes Tiago Caiado Guerreiro.

Taxes “cannot be confiscatory

But even if taxes are raised, there will always be property owners who don’t want to put their empty houses on the market. So how do you “force”, as Mariana Mortágua defends? Is it by expropriation?

The Left Bloc rejects the scenario: “It’s not about taking houses away from the owners, but about creating mechanisms to encourage them to put them on the market. We don’t want to take anything away from the owners.

However, the landlords, in the voice of Menezes Leitão, have another view on the matter: “Any forced lease is an expropriation. And the tenants also disagree with this solution.

Real Estate Investing And Property Tax. Price And Economy
Real Estate Investing And Property Tax. Price And Economy

With the increase in IMI having little impact on the current model, Romão Lavadinho, from the Association of Lisbon Tenants, insists that it is necessary to go even further. How? By raising the tax to such an extent that it would leave no other option. For example, above 40% of the patrimonial value.

In response, Menezes Leitão says that “this is unconstitutional. And tax experts follow in the same vein: “There’s one thing taxes can’t be – they can’t be confiscatory, so violent that they lead the person to lose their property. The countries that have done this are either dictatorships or have had revolutions,” Tiago Caiado Guerreiro simplifies.

The Blacklist

Landlords and surveyors are unanimous in their assessment: there are not more homes coming onto the market because landlords feel they have little power with tenants. That is, they feel they cannot quickly evict a tenant if he or she stops paying rent, and they cannot be reimbursed for the cost of renovations due to the “destruction”, in many cases, of the properties. If they do, they risk years in court.

“There are three key issues: ensuring and streamlining the mechanisms to collect unpaid rents; streamlining the removal of people from houses when they don’t pay; and the tax deduction of loan repayments and interest from property income,” positions tax expert Luis Leon.

Tiago Caiado Guerreiro even defends the creation of a “black list of bad tenants” to give more security to tenants, guaranteeing that they won’t put in their homes someone with a history of non-compliance or violence. “I know of cases where even bricks have been removed,” he exemplifies.

For landlords, Menezes Leitão also reinforces that the lack of flexibility in lease contracts – not allowing, for example, one year lease – also discourages many owners from putting their empty properties on the market.

The discarded

This example is given by António Frias Marques, president of the National Association of Owners: a woman had a building in the Estrela area, in Lisbon, which fell into disrepair because it had old rents, the building ended up vacant and, as a result, her IMI payment increased; the woman was unable to pay, the property should end up in the hands of the City Council.

“There are hundreds and hundreds of buildings that end up in the hands of the City Council. And they remain vacant,” says Frias Marques, to remind us that the State itself has failed when it comes to implementing housing strategies. And it is not the only one.

If Tiago Caiado Guerreiro remembers that the State has many houses that could be given away for affordable housing, Luís Leon reminds us that the Government has failed to build university residences, which would allow the housing used by students in the main cities to be channeled to other families.

Faced with privately owned vacant buildings, landlords and tenants agree on a solution: the State would support rehabilitation with non-refundable grants and loans. With the commitment that the properties would be used as affordable rentals, and the return they would get would then be deducted from this value.

What is a vacant house?

Municipalities have the power to increase the IMI on vacant houses, but not all of them do so. They are, in fact, a minority. In May 2022, they would not reach 30.

Vacant houses are those that have been unoccupied for more than a year. The inventory work is done by the municipalities, using telecommunications, gas, electricity, and water companies, which annually send a list of the absence of contracts in the houses.

The IMI increase applies to houses in areas of urban pressure and vacant for more than two years. The normal IMI rates vary between 0.3% and 0.45%. As the years go by, the increase gets bigger, from six to 12 times more.

Summer homes and emigrants’ houses, among others, are not considered vacant houses.

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