A study warns that rent control is ineffective in the medium and long term, according to a group of researchers who evaluated its impact.
“Price control can only be effective in the short term and is generationally unfair,” states Marli Fernandes, one of the researchers involved in the project developed by the Nova SBE Economics for Policy Knowledge Center in partnership with the Calouste Gulbenkian Foundation.
The study, released today, concludes that this political measure compromises the rights and needs of future generations.
“In the short term, economically disadvantaged people gain access to housing and tend to stay in those homes. However, in the medium and long term, the supply begins to decrease and prices rise,” explains Marli Fernandes, citing the example of San Francisco, a city that also experienced strong price controls in the 1990s, eventually discouraging landlords from offering their apartments on the rental market.
In Portugal, the percentage of housing available for rent has fallen to less than half since 1960, according to the 2021 Census. With reduced supply, prices naturally increase. While it’s still common to find low rents in older homes occupied by older people, rents in newer properties are often prohibitive.
The study reveals that 70.51% of Portuguese pay less than 400 euros per month for housing. In Lisbon, this percentage is smaller but nearly half of all contracts are included. These are mostly old contracts, often signed before 1991, notes Marli Fernandes.
Within this segment of low rents, 30.53% of tenants in Lisbon pay less than 200 euros per month. In Porto, 44.5% pay less than 200 euros.
While previous generations have had access and continue to benefit from affordable housing, younger people now face rental contracts with high prices: 28.85% of rental contracts in Lisbon are valued at 650 euros or more, and nearly 10% exceed 1,000 euros. In several Lisbon neighborhoods, landlords currently ask about 1,200 euros for a two-bedroom apartment, according to an analysis that compared prices across various platforms.
The researchers believe price control is only effective in the short term and is generationally unfair, contrasting with the increase in housing supply, which they view as both effective and generationally fair.
The researchers highlight countries like Finland, which in the past chose to liberalize the rental market to increase housing supply while simultaneously developing support measures for vulnerable families and expanding the social housing stock.
The Nova SBE study also recommends liberalizing the market and expanding the public housing stock. Meanwhile, families unable to afford market-rate rents “should be identified and supported.”
Marli Fernandes acknowledges that these issues cannot be resolved in two or three years, suggesting that efforts should begin with supporting vulnerable families, followed by market liberalization.
Portugal ranks at the bottom in Europe regarding public housing stock, which comprises only 2% of all dwellings, in contrast to Sweden, where 40% of housing is social and cooperative, based on a comparison of 13 countries.
