SOS to the new government: the changes in housing demanded by the sector

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Real estate professionals tell idealista/news that much remains to be done to increase the supply of homes in the country.

The 2024 parliamentary elections will decide Portugal’s new political direction for the next four years, if everything goes smoothly, such as the legal issues that caused socialist António Costa to resign as prime minister of the current absolute majority government. Next Sunday, March 10, the Portuguese will be called to the polls to elect the deputies who will sit in the Assembly of the Republic. And one of the major issues facing the new government is guaranteeing access to housing for all. There is still a lot to be done to increase the supply of homes to buy and rent in the country, say the economists and real estate professionals interviewed by idealista/news. That’s why they leave several clues as to how to solve housing problems in the next parliamentary term, whether by creating new incentives or ensuring legislative stability and confidence in the market.

Access to housing in Portugal is difficult: what’s the problem?

Although there is a surplus of housing in the country compared to the number of households, many of these houses are not ready for habitation, need work, are too large for today’s (increasingly small) households or are located in areas of the country where there is no significant demand, as the Institute of Housing and Urban Rehabilitation (IHRU) concluded in a recent study on housing.

If, on the one hand, the answer to Portugal ‘s housing shortage lies in rehabilitating and remodeling existing housing, on the other hand, it also involves building more houses. But what the market feels is that fewer and fewer houses are being built in Portugal. “At the end of the 1990s and beginning of the 2000s, more than 110,000 houses were being built every year, which contributed to a greater balance in the market. But in the last five years, only between 25,000 and 31,000 houses have been built each year, while between 150,000 and 160,000 houses have been sold. In other words, for every six houses sold, only one was built,” Beatriz Rubio, CEO of REMAX Portugal, told idealista/news.

The lower level of housing construction in recent years has therefore exacerbated the creation of a supply of homes to buy or rent that meets the needs of demand. This imbalance results in higher prices and, consequently, greater difficulties in finding affordable housing. As if that weren’t enough, “increases in the cost of energy, building materials and labor have also made new construction more expensive, making it less accessible to the lower-income classes,” Beatriz Rubio points out.

Although the underlying issue lies in the imbalance between supply and demand for housing, Vera Gouveia Barros admits to idealista/news that the new government needs to go further, analyzing the problem in detail: “The first step has to be to have a diagnosis. Without it, you can’t propose measures that are known to substantially improve housing affordability, which (…) puts housing costs and income on the scales.” For this reason, the economist argues that we have to understand why there are families who are dissatisfied with the housing they live in and also look at the employment situation of younger people, “because those who don’t have an income , or have a very low one, can’t emancipate themselves no matter what the cost of a house”.

Likewise, David Moura-George, managing director of Athena Advisers, admits that “the problem of access to housing is also due to the fact that salaries in our country do not keep up with the appreciation of real estate”, which is an “issue that the measures taken in this sector cannot resolve”.

What measures should be implemented to improve access to housing?

 

There are many variables to solve the problem of access to housing in Portugal . And real estate professionals admit to idealista/news that there is still a lot that can be done in terms of creating housing supply, tax revision and legislative stability. It is in this sense that they leave several measures that the new government can implement with a view to improving access to housing in our country:

• Creating more confidence and legislative stability: “In order to attract investors to all market segments, it is necessary to create a regime pact with incentives for those who commit to building new housing with the guarantee that these measures will be in force for 10, 20, 30 years. In renting, the owner must be protected as well as the tenant, but until now this has never happened in a balanced way,” Hugo Santos Ferreira, president of the Portuguese Association of Real Estate Developers and Investors (APPII), told idealista/news;

• Reducing taxes: today, “the tax burden in the housing sector is excessive, and can be between 40% and 50%,” admits Hugo Santos Ferreira, and he therefore advocates “a tax reform that allows more houses to be built for everyone” and “significantly lowers” the price of houses, which would involve eliminating the 23% VAT on construction, creating the alternative of deducting VAT and also eliminating AIMI. David Moura-George also argues that there should be a “reduction in VAT to 6% for the development of any type of construction. In addition to reducing VAT, Miguel Lacerda, Lisbon Residential Director at Savills, adds that there should be a “VAT exemption on construction for affordable rents, whose regime should also be simplified”;

• Increasing the public supply of housing: David Moura-George argues that there is a need for a “public housing policy by making public land available for construction and vacant public property to develop homes compatible with the salaries of the Portuguese”, as well as social housing. The fact is that many rehabilitated public buildings are not financially sustainable and the housing is put on the market at affordable prices. In this case, Beatriz Rubio believes that the best solution is to find a financially sustainable solution for the rehabilitated heritage and “invest the money generated in other projects” that can guarantee affordable housing;

• Significant improvement in the urban licensing process: although the new urban licensing simplex is an “important first step” (although it raises doubts about its application), the president of APPII admits that “there is still a lot to be done in this area, specifically there needs to be a reduction in the time and obstacles involved in licensing residential properties”. In addition, Hugo Santos Ferrera advocates “the creation of a national strategy for urban licensing, whose mission is to implement a unified culture of procedures in the municipalities, in favor of creating more housing for all”;

• Swift and accessible justice: this is an important measure “so that, in the rental sector, tenants and landlords feel protected when the other party fails to meet their obligations. It’s also important for resolving inheritance disputes that may be preventing houses from being put on the market,” says Vera Gouveia Barros;

• Quick approval of the Construction Code: this law will “summarize and encompass almost two thousand laws applicable to the construction of a building and bring urban planning procedures into the 21st century, with the creation of single centralized platforms at national level for entering and processing processes,” believes Hugo Santos Ferreira. It should also be noted that the Construction Code will replace the 1951 General Regulation on Urban Buildings (RGEU) which, according to José Cardoso Botelho, CEO of Vanguard Properties, is also responsible for “increasing the cost of construction”;

• Changing the PDMs to create more urban areas: the CEO of REMAX Portugal says that there needs to be “an expansion of the areas available for housing, by revising the Municipal Master Plans (PDMs). There is also a need for ” urban area requalification programs in the metropolitan areas of Lisbon and Porto”, says Vera Gouveia Barros;

• Improving urban mobility: to facilitate access to more affordable housing outside urban centers, Ricardo Sousa, CEO of Century 21, says that it is necessary to “modernize and expand metro and train lines, especially in Greater Lisbon; prioritize expansion in areas such as Loures and the planned sustainable intermodal lines; and improve and expand CP’s urban lines, particularly the northern line to reach further afield”;

• Encouraging sustainable construction: on this point, the president of APPII advocates the “creation of subsidized lines for accessible construction and combating climate change” and also “reduced VAT for all materials that enable green construction”;

• Industrialization of house construction: in addition to traditional construction, Ricardo Sousa believes that it is necessary to “encourage innovation and industrialization of construction, using faster and more sustainable building methods, promoting inclusion and professional qualification”, as is the case with modular and prefabricated houses ;

• Incentives for young people to buy a house: on this point, several experts believe that young people up to the age of 35 should be exempt from IMT and stamp duty when buying their first home. They also advocate the creation of subsidized lines for young people to buy a house. In addition to all this, Miguel Lacerda, from Savills, also advocates “a reduction in the IRS rate for young people”;
• Deduction of home loan interest in the IRS for everyone: standardize the measure that is currently only applied to home loans taken out up to 2011, argues the economist. This measure has already been on the table and was rejected by the Socialists.

How to build more affordable housing? Private individuals need incentives

The problem of access to housing cannot be solved simply by the state building houses. Private developers have a fundamental role to play here, but they need more incentives to build affordable housing in Portugal , say the experts interviewed by idealista/news. These are some of the measures that the new government could take to ensure that there are more homes to buy and rent developed by private developers:

• Transfer of land and public (and vacant) assets for the construction of affordable housing: for Beatriz Rubio, “an innovative approach could be for the state to make land available free of charge to builders, on the condition that the sale prices of the properties built are limited”;

• Reduce VAT rate for affordable rental projects;

• Tax exemption on the purchase of land for affordable housing projects;

• Reducing tax on property income: “There needs to be a tax-free rate on rent depending on the effort rate and the length of the contract, rewarding landlords who guarantee the affordability of housing and its legal security,” says Vera Gouveia Barros;

• More legislative and fiscal stability to re-establish “investor confidence to bet on rentals” and “combat the informality” present in the market, argues the CEO of Century 21. Furthermore, without confidence and stability, “national banks won’t finance long-term rental projects, so the opportunity is to be able to attract large pension funds that are looking for stable, long-term returns with low risk – and therefore lower yields,” says the CEO of Vanguard Properties;

• More incentives for Built-to-rent and Buy-to-rent: for Alfredo Valente, CEO of iad Portugal, it is “important to create the conditions for private investment in the buy-to-rent or build-to-rent market. In other words, incentives to build houses for rent and incentives for private investors to buy houses for rent.

Although there is general agreement that the tax reform will encourage an increase in the supply of affordable housing by the private sector, this is not the case with public-private partnerships (PPPs). José Cardoso Botelho, from Vanguard Properties, says he has “plenty of doubts because there is a huge distrust of the state as a partner”, and there are challenges in terms of the transparency of decisions and the profitability of the transaction. But he also sees advantages in access to assets, land or public buildings to be rehabilitated.

These are some of the measures that the new government can implement to help solve Portugal’s housing shortage. However, as Beatriz Rubio points out, “access to housing is a very complex and structural problem, which has worsened in recent years”. This is why Rui Torgal, CEO of ERA Portugal, believes that “a long-term strategy is needed that is reflected in structural measures. In other words, we need solutions to the root of the problem – not just palliative measures to mitigate the consequences,” such as Mais Habitação.

Hervé Hubert
Hervé Hubert
Hervé Hubert is a 55-year-old writer and journalist based in Porto, Portugal. Born in France, he brings a unique blend of French and Portuguese perspectives to his work. Education Hervé studied Journalism and Literature at the University of Lyon in France. After completing his studies, he gained valuable experience working with various French media outlets (Portugal France also). Career He worked for several years as a journalist in France before making the move to Portugal. In Porto, he joined the Portugal Pulse team as a staff writer. Skills Hervé specializes in storytelling, investigative journalism, and cultural commentary. He has a flair for capturing complex issues in a relatable way. Personal Life He currently resides in Porto and enjoys the city's rich culture, from Fado music to Francesinha cuisine. Hervé continues to maintain strong ties to his French heritage, often traveling back to France for family visits and cultural exploration. With his unique background and diverse skill set, Hervé Hubert adds a layered, multicultural lens to every story he covers.

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