More Housing Package — Measures and Consequences

Approved in the Council of Ministers last March, the government’s “More Housing Package” has already been submitted for plenary discussion in the Assembly of the Republic and approved in its entirety on May 19, 2023. It was presented as a response to the housing crisis in Portugal, proposing measures aimed at increasing the supply of housing properties, streamlining licensing processes, increasing the number of rental homes in the market, combating speculation, and protecting families.

The government proposes the following measures:

1. Conversion of commercial or service properties for residential use without the need for territorial planning revisions or housing licenses.
2. Making state-owned properties available to cooperatives or private developers under the Development for Housing Contracts (CDH), with the purpose of construction, conversion, or rehabilitation for affordable rental programs.
3. Mobilization of public land for affordable rental projects.

To simplify licensing processes, the following proposals have been made:

1. Implementation of late interest charges for municipalities and external entities responsible for licensing delays.
2. Licensing with liability statements from designers.

Regarding the increase in available rental properties, the measures to be adopted are as follows:

1. Reinforcing the confidence of property owners through:
   • State leasing for subleasing, ensuring property owners’ subsistence and immediate provision of housing for low-income households or those facing difficulties in accessing rentals.
   • State guarantee of payment after three months of non-compliance, with the state taking over the property owner’s position for debt recovery through tax enforcement, eviction proceedings, or social support provision or relocation.
   • Reduction of the IRS tax rate for long-term residential lease contracts.
2. Increasing public supply through tax exemption, in terms of IRS, on capital gains from property sales to the state.
3. Promoting affordable rental through:
   • Providing €150,000,000 (one hundred and fifty million euros) in financing to municipalities for coercive works.
   • Encouraging the conversion of properties currently operating as local accommodations into residential housing, proposing the suspension of new licenses nationwide, the need for reassessment of existing licenses in 2030, and subsequent non-automatic five-year renewals; expiration of licenses upon transfer.
   • Giving condominiums the power to terminate licenses issued without their approval.
   • Mandatory leasing of vacant properties by the state for subleasing.
   • Tax exemption for properties dedicated to affordable rental programs, including the implementation of a 6% VAT rate for construction or rehabilitation works, a three-year exemption from property tax (IMI) after rehabilitation, and an exemption from property transfer tax (IMT) for purchases aimed at affordable housing programs.

Regarding the combat against speculation, the measures mainly focus on:

1. Ending golden visas, ensuring that renewals for those already granted will only occur if the property that served as the basis for the investment is intended for the owner’s or descendant’s own and permanent residence or for a housing lease contract for a period of no less than five years.
2. Ensuring fair rent in new lease contracts, prohibiting, in the case of a property already leased and a new contract being made, an increase exceeding 2% of the rental value, without prejudice to updates based on INE coefficients.

Finally, concerning the protection of families, the following proposals have been made:

1. Exempting capital gains from income tax (IRS) in relation to the repayment of home loans by the owner or their descendants.
2. In the context of home loans, requiring banks to offer a fixed interest rate and protection against interest rate hikes.
3. Providing extraordinary support for rental payments to households with affordability rates above 35%, up to the sixth income bracket.
4. Protecting tenants with leases concluded before the Residential Tenancy Act (RAU), that is, before 1990, when their corrected annual gross income is less than 5 times the annual national minimum wage, and when they are 65 years of age or older or have a documented disability with a proven degree of incapacity equal to or greater than 60%.

And in order to ensure the protection of these tenants, the government has suggested:

1. Exemption from income tax (IRS) on rental income and exemption from property tax (IMI) for landlords with these lease contracts.
2. Regulation of compensation to landlords for not increasing rents; and
3. Ensuring that contracts do not transition to the New Urban Rental Regime (NRAU).

Faster and more efficient justice, with the creation of a single rental desk, merging the creation of a rental