With measures still to be put into law things are not set in stone, but is change on the horizon?

On March 30th, 2023, the Council of Ministers in Portugal approved new measures for their Mais Habitação program aiming to promote affordable housing in the country. The government has already approved bills supporting rent and housing credit, and two more will now be debated as well as a decree law to encourage investment in affordable leases. If approved, these legislative changes will have an impact on the real estate sector and the lives of those who live and invest in Portugal.

The Mais Habitação program has two main objectives: supporting families in accessing housing and guaranteeing more affordable housing for them. By approving several proposals related to the area of housing the Government hopes to stimulate new affordable rental projects, launch a new generation of affordable housing cooperatives, give confidence to the rental market and citizens, and mobilize available assets.

According to the Prime Minister, the Government will increase the supply of public housing through the construction of "26,000 dwellings by 2026" while also - and possibly most disruptive for Algarve owners and prospective buyers - encouraging and mobilising the private sector to place their homes on the long-term rather than short-term rental market through incentives.

There are several measures on the table for debate, but the 2 most pressing issues for our clients are possible changes to the laws over Alojamento Local (AL, short-term holiday rentals) and the Golden Visa.

• AL restrictions will only apply to apartments in mainland Portugal and will not be enforced in low-density municipalities.

• AL apartments that are currently used for short-term rentals that move to the long-term rental market by the end of 2024 will be exempt from IRS on rents until December 31, 2030.

• The extraordinary tax will be reduced from 35% to 25% and this rate will drop significantly the longer the lease is. In a five-year contract it will drop from 25% to 16%, in a five to 10-year contract it will drop from 23% to 15%, from 10 to 20 years from 14% to 10% and for more than 20 years it will drop from 10% to 5%.

• New AL licenses will not be issued again until 2030 in high-density areas – in the Algarve high density areas are all except VRSA, Castro Marim, Alcoutin, Aljezur, Monchique and Vila do Bispo. New licenses will only be valid for 5 years. There is only one exception to these restrictions – for those who used credit to invest in the purchase of the property or for renovation, municipalities are obliged to renew the license in 2030 until the end of the loan.

• To prove that AL licenses are active, in the first 2 months after the proposed law comes into force, landlords must deliver their tax declaration proving that they have been renting the properties as AL.

There will also be enforced leasing of apartments that have been vacant for more than 2 years. Holiday homes, those that are vacant because the respective owner is in a nursing home or providing permanent care as an informal caregiver; and those of emigrants, as well as those of people displaced for professional, health or training reasons, are not considered vacant for this purpose.

• As the Government hinted at earlier in the year, golden visas will no longer be granted for the acquisition of real estate. Existing golden visas will be converted into normal residence permits, and those under consideration will continue to be considered and will be processed by the general regime.

• In the case of the renewals of those Golden Visas already assigned, provided that the respective requirements have been and continue to be met, they will be verified by the competent authorities for the verification of the entrepreneurial project in progress.

Some of the other main measures:

• State-owned land or buildings are to be offered up to private developers for the development of affordable housing projects.

• Rural buildings that aren’t being used will be charged IMI municipal property tax as if they were urban properties.

• A new programme entitled Porta 65 + has been created to help families who have been affected by a reduction in income or for single parents.

These measures are not set in stone and are due to be discussed in Parliament where more opposition is expected. Even if they all get approval they will be presented to the President of the Republic, Marcelo Rebelo de Sousa, who has admitted to vetoing some of the measures.

Obviously, these changes, if put into law, will affect many of our clients and so if you have any questions or would like further clarification then please don’t hesitate to pick up the phone or drop us an email and we will be happy to go through things with as much clarity as we can at this time.