Portugal needs to build 45,000 houses a year to solve the housing crisis

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AICCOPN believes that the government’s program is “a strong stimulus” to housing construction. The measures will make it possible to provide “a rapid response” to the country’s needs, it argues. But not everything is perfect. The sector keeps pointing out difficulties and omissions

We need to build 45,000 houses a year to respond to the country’s “serious housing shortage”, admits the Association of Civil Construction and Public Works Industrialists (AICCOPN). That’s 13,000 more than will be built in 2023. This urgency seems to have an answer in the government’s program, presented last Wednesday. That, at least, is the sector’s conviction. Manuel Reis Campos, president of AICCOPN, believes that the measures announced “meet the needs identified”. When put into practice, “they will be a strong stimulus to housing construction and, in this way, a swift response” to the housing crisis. But there are thorns. Agents in the sector also point out difficulties and shortcomings.

For Bento Aires, a real estate expert and lecturer at Porto Business School, the PSD-CDS-PP program offers “conditions for more housing to be produced”, but “it doesn’t seem like much, given the problem we have”. As he points out, “it is clearly assumed at the beginning of the housing chapter that previous policies have failed, and I don’t know if these are enough not to fail”. In his opinion, the government focused “more on the problem of access to housing in quantity, and not on the quality of the existing building stock”. For Paulo Caiado, president of the Association of Real Estate Professionals and Companies of Portugal (APEMIP), the program makes “very important contributions to solving the housing problem in Portugal”. As he points out, “using the margin contained in the tax structure associated with the construction of new homes, supporting young people in accessing their first home, clarifying the importance of cohabitation between a free market and a controlled market, pacifying the relationship between tenants and landlords, gaining the trust of investors and landlords” are all important steps.

Luís Montenegro’s government has made commitments on several fronts. To increase supply, it plans to create public-private partnerships for the large-scale construction and rehabilitation of houses and student accommodation, and to encourage the promotion of new housing concepts, such as build to rent and modular construction. It bets on private development, but also on public and cooperative development, and to this end it proposes injecting vacant or underused state-owned properties and land into the market almost automatically. In the document, it also admits the relaxation of land occupation limitations and urban densities (including high-rise construction), and the possibility of increasing urban perimeters, among other measures. It doesn’t forget the difficulty young people have in accessing a home of their own and, in response, pledges to support the purchase of a first home through a public guarantee for bank financing of the entire purchase price, with exemption from IMT and Stamp Duty. It pays attention to the long-standing demands of the construction industry and lowers VAT.

At the moment, the program is a letter of intent, with no dates for implementation or quantification of the cost of the measures, which makes an ideological break with the PS’s previous housing policy. “We don’t believe that the answer to the housing crisis lies in administrative price controls, rent freezes or limiting rents within very strict limits,” the document reads. It will therefore be the end of rent freezes, with vulnerable tenants benefiting from subsidies, and also the repeal of forced renting, as well as the elimination of the additional contribution from local accommodation (LA) and the repeal of the suspension of licenses and prohibition on transferring them, measures included in the PS’s Mais Habitação package. With all this, the government intends to increase the supply of affordable housing, both in the rental and purchase markets.

Tax relief

In this aim to mitigate the country’s housing shortage, the tax relief provided for in the program is the measure most applauded by agents in the sector. “It’s important to highlight as positive the extension of VAT to the minimum rate of 6% on construction works and services,” says Bento Aires. The government is proposing to lower VAT on the construction and rehabilitation of houses throughout the country from the current 23% to a minimum rate of 6%. This proposal – an election promise – has been presented as “exceptional” and “temporary”, and limited to works whose purpose is permanent housing. The boost to the sector also extends to the intention to reduce or eliminate the costs of urbanization, building, use and occupation processes. For Ricardo Sousa, CEO of Century 21 Portugal, this is a “positive initiative”, as “it should reduce construction costs and encourage the development of new housing projects, increasing supply in the market”.

Reis Campos follows the same reasoning. As he points out, “Portugal needs to take effective measures to reverse the current situation in the housing market” and, to do this, we need to “build more and rehabilitate more”. This emergency can only be resolved by adopting essential measures, such as “reducing the tax burden on construction and real estate, promoting private investment in housing, providing lines of financing for construction, creating a real rental market and effectively simplifying the administrative procedures associated with licensing urban planning operations,” he argues. Still in the field of taxation, Reis Campos recalls that the program is silent on “the extinction of the IMI surcharge, a tax that is considered inappropriate”.

Ricardo Sousa even advocates that the scale and urgency of the problem “require a consensus and broad commitment from all parties with a parliamentary seat, bearing in mind that the time horizon for its implementation and achievement of results implies a long-term strategic vision”. In his opinion, the commitments of Luís Montenegro’s government regarding the modernization and expansion of metro and train lines, the increase in urban perimeters, the reinforcement of frequency and the promotion of competition on the railroad, with a focus on metropolitan areas such as Lisbon and Porto, “are crucial”. These are “essential measures to facilitate access to areas with more affordable housing, better connecting residential areas with employment and education centers”, he stresses.

Difficulties and omissions

However, the “government was not very clear” about the technical reforms underway, says Bento Aires. The Porto Business School expert recalls that changes were being made to the licensing process and a new building code was being prepared, “which are structural for the housing and construction market”, but the government’s program doesn’t clarify its commitment to this matter. “Failure to conclude this will lead to problems in the medium and long term, and difficulties in licensing,” he argues, stressing that it is “almost unacceptable to have basic legislation for the construction sector that dates back to the 1950s”.

Ricardo Sousa regrets that the program doesn’t provide “extraordinary financial support for really vulnerable households who are struggling with 50% or more of their net disposable income on housing (rent or mortgage) and also on access to housing”. In his opinion, “any measure to encourage and support demand that is too general is a mistake”. He argues that “the government’s focus must be on increasing the public supply of social housing” and “implementing support measures for families in urgent need of housing and vulnerable families in the short term”. In the area of mistakes, the president of APEMIP calls on the government “not to ignore the real reasons that have led to the housing shortage and the disparity between the increase in house prices and the incomes of most families”. Combating informality in the rental market is another measure that the CEO of Century 21 would have liked to have seen in the program for this legislature.

Moti Shabi
Moti Shabi
Moti Shabi

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