In Portugal, there is a high housing vacancy rate and a high housing shortage, particularly of affordable housing (e.g., Eurostat, Housing price statistics - house price index, 5 July 2023; and The 2023 edition of our Expat Insider survey).
This is explained by the “increased private investment and exports of services associated with tourism”, which “has produced contradictory effects”: it “has allowed the recovery of economic activity” and the “requalification of urban centres”; but there has also been “a very significant rise in housing prices and rents, first in areas with greater tourism pressure and later spreading to peripheral territories”, forcing many families to move house or increase their housing effort rate (explanatory memorandum of the Draft Law 71/XV/1, of 14 April 2023, that establishes measures to ensure more housing). This act was voted and adopted on its general principles and on the details (Article 168 of the Constitution) by the Parliament (Assembly of the Republic) on 6 July 2023. It has to be enacted as law by the President of the Republic (Article 136 of the Constitution).
This is the most recent and controversial legislative intervention regarding housing. There have been several participations during the public consultation period, several opinions were included in the legislative procedure and numerous proposals to modify the initial Government proposal were presented by the political Parties in Parliament.
Among the subject provisions are, on the one hand, the following: i) a support for affordable rental housing by a financing line and the provision of public land and buildings for affordable housing projects , namely for construction or rehabilitation; ii) the promotion of a “new generation of cooperatives” for the promotion of affordable housing following a partnership between the State, municipalities and the co-operative sector; iii) the definition of exceptional and transitional rules regarding the value of rents in new rental contracts subsequent to contracts concluded in the last five years; iv) the protection of tenants with rental contracts prior to 1990 and the guarantee of fair compensation for the landlords; v) the integration of the special eviction procedure and the injunction in matters of lease in “the Tenant and Landlord Counter” (within the Directorate-General for the Administration of Justice), to simplify and improve it, while strengthening the guarantees of the parties; and vi) the approval of various tax measures to promote and support renting.
The most politically and legally controversial measures adopted are:
i) The forced lease of houses that have been empty for at least two years with no signs of utility payments;
ii) The suspension of new local accommodation licences (which will depend namely on the appropriate balance of housing supply and student accommodation in the municipalities, defined in the Municipal Housing Charters [the municipal instrument for planning and land use in housing matters], except in areas declared as having housing shortage, where new licences are not possible), the amendment of the renewal and expiry regime, the programmed review of local accommodation registrations issued, the creation of an exceptional tax surcharge on flats and accommodation establishments integrated in an autonomous fraction of a building in local accommodation;
iii) The end of the “Golden Visa Program”, by repealing real estate investment residence permits provisions (investments such as the purchase of real estate property with a value of or above 500 thousand euros or with construction dating back more than 30 years or located in urban regeneration areas, for refurbishing, for a total value equal to or above 350 thousand euros).
Regarding the forced lease of vacant houses, it is argued that it breaches the right to property (Article 62 of the Constitution and Article 17 of the EU Charter of Fundamental Rights - CFR). According to Portuguese Constitutional Court jurisprudence (e.g., Ruling No. 444/2008, Case no. 80/2008, 2nd Section), the function of the right to property is to protect an individual’s legal position in relation to his/her assets in the face of socialisation, political confiscation, or expropriation measures; and restrictions on property rights are possible, provided they are based on parliamentary law and are proportionate to a legitimate objective.
At issue is the right to use and dispose of their own possessions and not the deprivation of property. The main criticism regards the disproportionality of the measure, both its suitability and necessity tests (e.g., Article 18 of the Constitution and Article 17 of the CFR, according to which “[t]he use of property may be regulated by law in so far as is necessary for the general interest”). The objective is to increase the supply of properties for housing purposes and to protect and promote the right to housing (Article 65 [Housing and urbanism] of the Constitution). To place on the market more autonomous fractions and parts of urban buildings susceptible to independent use, for residential use, classified as vacant, would be, prima facie, appropriate within that objective. Nevertheless, it is pointed out that it will be very difficult to have the necessary contribution of the municipalities and to count on their administrative capacity to identify vacant houses and to manage the procedure regarding the acquiescent or disagreement of the landlords. On the other hand, it is highlighted that the large number of public houses should be placed on the market before private landlords are forced to do so.
It has been pointed out that forced lease is not new in the Portuguese legal order. In fact, it is already established in the context of and following works carried out by the municipalities in the name of the owner who refused to do it or did not do it when called upon to do so, with forced lease being an alternative to collecting a debt resulting from the works that should have been performed by the owners (Article 57 of the Decree-Law no. 307/2009, of 23 October - legal regime for urban regeneration -, as modified by Law no. 32/2012, of 14 August; Article 36(1) of Law no. 31/2014, of 30 May, Law on the general basis for public policies on soils, land use and urbanism; and Articles 107 and 108-B of the Decree-Law No. 555/99, of 16 December - legal regime of the urbanisation and edification -, as modified by the Decree-Law No. 66/2019, of 21 May). Forced lease is also possible regarding rural buildings and mixed buildings with no known owner and which are not being used for their intended purpose; and regarding rustic buildings subject to integrated landscape management operation (Article 36(2) and (3) of Law no. 31/2014, mentioned).
Notwithstanding, forced letting of vacant houses in the “More housing” 2023 regulation is more intrusive, inasmuch it can take place if the owner, after being notified of the duty to give use to the autonomous fraction, or to submit a lease proposal (up to the maximum limit of a normative reference value), does not do so. That means that if the owner refuses the make an offer or does not answer within 90 days after being notified, and the property remains vacant, the municipalities may proceed. If the municipalities do not intend to proceed with the forced lease and no conservation works are needed, they must send the information to the Instituto da Habitação e da Reabilitação Urbana, I.P. (IHRU, Institute of Housing and Urban Rehabilitation), who will decide about forced lease.
The houses within the scope regulation are those that, being located outside interior territories (mainly in urban pressure zones), are unoccupied for more than two years, as ascertained by the municipalities, through the application of criteria laid down by the law. It is relevant, for instance, the absence of contracts in force with telecommunications companies and water, gas and electricity supply companies, and the absence of invoicing for water, gas, electricity and telecommunications consumption. This assessment and criteria are not quite coherent with the definition of vacant housing unit in the Basic Housing Law, approved by Law No. 83/2019, of 3 September 2019, which requires an unjustified reason for the house to be continuously unoccupied and imputable to the owner (Article 5(1)).
As aforementioned, the most contentious question regards the proportionality of the restriction of the right to property grounded in its social dimension. The Basic Housing Law states that “[t]he State promotes the effective use of vacant public housing and encourages the effective use of vacant private housing” (Article 3(6)). The “social function of housing” is defined as “the effective residential use of buildings or housing units”, under the law terms and in the public interest (Article 4(1)). Against the restriction proportionality is the provision according to which “[t]o guarantee the social function of housing, the State shall primarily resort to the use of public built estate, callable to rental housing programmes” (Article 4(3)).
This last provision shows that forced lease of private owners’ properties has a most relevant argument against it in the number (although it only accounts for 2% of the total stock) of publicly owned properties that are not being used, many of which are in need of rehabilitation. Bearing in mind the proportionality criticism, as a last amendment made at the parliamentary details vote details parliamentary vote, the law now states that forced lease is “exceptional and suppletive”.
Another problematic point in the new regulation regards the foreseen immediate application of the pending procedure at the end of residence permits for investment, as it was argued that it would breach the principle of protection of trust (Article 2 of the Constitution). The initial Government proposal was emended at the parliamentary discussion and applications for the granting and renewal of residence permits for investment activity pending on the date of entry into force of the new law remain valid. Thus, the law did not go as far as envisaged in the initial version of its proposal, falling short of the Commission Recommendation of of 28.3.2022 on immediate steps in the context of the Russian invasion of Ukraine in relation to investor citizenship schemes and investor residence schemes, according to which Member States shall “immediately repeal any existing investor citizenship schemes, and to operate investor residence schemes prudently” (recital 7).
The “More Housing” legislation follows various previous legislative interventions regarding housing, all focused on resolving the shortage problem of affordable houses. One legislative piece that is worth highlighting is the Decree-Law no. 38/2023, of 29 May. It creates a rental regime for sub-leasing for families with difficulties in accessing housing on the market. According to this, the houses are rented by the Instituto da Habitação e da Reabilitação Urbana, I.P. (IHRU), which agreed with the landlord the price of the rent up to a limit of 30% above the general rent price limits, by type and municipality where the property is located and guarantees the payment of rents. The tenants pay an amount set by the IHRU which must correspond to a maximum effort rate of 35% of the household’s average monthly income. The scope of specific housing support programmes is also expanded, encompassing situations of need for accommodation motivated by an unforeseeable or exceptional event related to migratory movements; applying a youth rental financial support instrument regardless of the age of the applicants when their income shortfall is more than 20% and to single-parent families.
Another important piece of legislation is the Decree-Law no. 82/2020, of 2 October, which regulates the inventory of the State’s real estate assets suitable for housing use and creates a State real estate stock for housing. The objective is to increase the supply of housing with public support to be made available under specific accessible rentals.
In the Reforms and investments under the Portuguese recovery and resilience plan (Annex I of the Proposal for a Council Implementing Decision on the approval of the assessment of the recovery and resilience plan for Portugal, July 2021) housing is its second component. “The main objectives of the component are: i) to increase the social and affordable housing supply (…); ii) to create a national public response to urgent and temporary accommodation needs arising from unexpected or unforeseeable events (…); and iii) to increase the supply of student accommodation at affordable prices”.
All the legislative measures planned and adopted so far aim to mobilise the placement of publicly and privately owned housing on the rental market and to control rental prices. They imply a strong collaboration between public administrations, in particular between the State and municipalities (to whom a large number of housing competences have been transferred by the State), and a capacity building Administration. These are and will be serious challenges to any change in housing landscape, besides the challenge of the complexity of the legal housing framework itself.