Restrictions ditched in favour of renewing business confidence
Portugal’s new government is ringing the changes in terms of how to deal with the crippling housing crisis, turning the last government’s ‘masterplan’ of restrictions into an open road for new investment.
In short, all the measures announced for curtailing Alojamento Local, or “AL” (short-term/holiday lettings), will be scrapped – the idea being that “confidence and stability” need to be returned “to those who invest in Portugal, and also to the real estate and tourism sector”.
The previous government’s ban on issuing new AL licences; the imposition of a new AL (special contribution) tax for certain areas; the block on allowing AL licences to stay in place through subsequent property sales – all these impediments to a regime brought in to stimulate investment will be thrown out (admittedly after what will no doubt be another heated debate in parliament).
In what could be seen as ‘an ingenious ruse’, the new government (with an agonisingly precarious ‘majority’) presented its four-year programme in parliament last week stressing that it has taken ideas from all parties.
“More than half the programme includes electoral pledges of the PS Socialists,” said the blurb. Thirteen of the 60 measures came from CHEGA. It made the subsequent opposition ballyhoo that the programme was “lacking in content” and “not ambitious enough” sound a trifle lame – and ultimately, particularly from the left wing, like sour grapes that it had not managed a triumphal return in last month’s elections.
In terms of HOUSING – beyond all the changes to Alojamento Local (AL) – AD’s approach is in:
- increasing supply (private, public and cooperative).
- promoting “stability and confidence” in the rental market.
- maintaining support for “vulnerable tenants”.
- supporting young people with 100% mortgages.
The strategy for increasing supply is perhaps the most detailed. The government wants to:
- Make land occupation limitations, urban densities (including high-rise construction) and construction demands and requirements more flexible, as well as the possibility of increasing urban perimeters, “guaranteeing a sustainable and socially cohesive and harmonious use of the territory as a way of guaranteeing access to housing”.
- Create conditions for “agricultural housing” at more affordable prices in rural and inland areas, namely by creating new urbanisable areas in Municipal Master Plans (PDM), especially in municipalities threatened by population loss.
- Inject into the market vacant or underutilised properties and public land.
- Create an exceptional and temporary scheme to eliminate or reduce tax costs on construction or rehabilitation work on properties intended for permanent habitation, regardless of their location in an ARU (area of urban rehabilitation). How? Through the substantial reduction or elimination of urbanisation, building, use and occupation taxes; the application of VAT at the minimum rate of 6% on construction and rehabilitation works and services, and the extension of tax deductibility.
- Create a Public-Private Partnership programme for “large-scale construction and rehabilitation of both general housing and student accommodation”.
- Encourage new housing concepts: build to rent, mixed housing with urban density bonuses for moderate cost housing, co-living, modular housing, housing co-operatives, dual flexible use of student residences.
- Plan and implement a public transport policy and supply “that supports the possibility of increasing urban perimeters and shortening the physical and temporal distances between existing ones, guaranteeing sustainable and socially cohesive and harmonious use of the territory as a way of guaranteeing access to housing”.
Stability and confidence in renting
This, believes the government, is imperative “to create a climate of confidence and security so that housing suitable for habitation is placed on the market”. The plan is to:
- Evaluate “counter-reforms” (particularly rules for freezing rents, even forcible renting of empty vacant property) introduced by PS Socialists over the last eight years.
- Review and speed up mechanisms for rapid resolution of disputes in the event of non-compliance with rental contracts.
- Evaluate the rent insurance mechanism provided for by law since 2013 and only implemented in 2019.
Support for vulnerable tenants
The government recognises that “there are many current and prospective tenants experiencing great difficulties and that a public policy to help them in this period of market imbalance is justified” but argues that stabilisation should be done “by subsidising tenants who need it, and not by generalised punishment of landlords, which would be paid for by everyone in the long run”. As such, it wants:
- The replacement of administrative price limitations with public subsidisation of tenants in situations of vulnerability/effective need (measured according to the effort rate and income level).
- Maintenance, “until the market stabilises”, of a dynamic rent subsidy that guarantees a contribution to families with high effort rates (meaning families who are spending ‘too much of their income’ securing the roof over their heads).
Supporting young people in buying first homes
The government wants to “free young people from paying two down payments” when buying their first property. These expensive additions to the process of house purchase involve IMT (tax) and Stamp Duty, on top of the deposit usually demanded for any mortgage. The new plan consists of:
- Eliminating IMT and Stamp Duty for the purchase of own permanent housing by young people up to the age of 35.
- A public guarantee to make it possible for young people to finance the entire price of their first home, without having to present a deposit.
In many ways, this measure is ingenious: political parties voting the government down will be seen by younger generations as parties that think more of political manoeuvering than the good of the country’s citizens.
AD’s housing policy also refers to increasing the scope of the Porta 65 Jovem programme – another measure focused on the young, although it does not provide further details.
All these measures will require approval by “an absolute majority of MPs in office” – and this is the great challenge of the government: getting its ideas accepted by a parliament filled with antagonistic ideologies.
Another ‘moot point’ is the cost of its various reforms: so far, the financial nitty gritty has not been explained.
AD’s government programme also involves:
- reduction of personal income tax (IRS) up to the 8th bracket – with focus on alleviating the tax burden on the middle class. This is just one of the tax measures that was part of the AD programme that includes reductions in corporate income tax, aimed at ensuring “effective taxation of profits at a rate of 15%, as well as the gradual elimination of the progressive State surcharge and municipal surcharge” (with loss of revenue for municipalities to be made up by compensatory measures in the State budget). The government also plans to exempt performance bonuses from contributions and taxes up to the equivalent of a monthly salary.
- creation of individual career plans for public sector workers.
- a quick decision on where to site Lisbon’s much-needed new airport.
- an increase in the Solidarity Supplement for the Elderly (CSI) to a reference value of €820 by 2028. The intention being to bring it “into line with the national minimum wage in the following legislature, and to improve access to social benefits so that those who really need them can benefit from them”.
- recovery of teachers’ service time over five years.
- priority review of PSP/GNR careers, pay etc.
- revisiting labour changes of the Decent Work Agenda
- extending anti-corruption rules to political parties and criminalising illicit enrichment.
- reformulating the SNS ‘executive directorate’ and local health units (brought in by PS Socialists).
- ensuring “timely GP appointments for everyone” by 2025.
- bringing in limits to immigration, through quotas. The aim being to “adopt the principle that we are a country with doors open to immigration, but not wide open, materialised in quantitative objectives for immigration, weighing up the dimension of security, prioritising in terms of qualifications and avoiding exploitation by illegal and criminal networks”.
By NATASHA DONN
