Lisbon's Rental Market Braces for Impact as Government Unveils New Tax Measures
The Portuguese government has announced a new package of fiscal measures aimed at the housing sector, following a recent Council of Ministers meeting where instruments for managing public property for affordable rentals were also approved. The focus of this latest announcement is on taxation, with significant changes proposed for rental income. Patrícia Barão, the vice-president of APEMIP, the association representing real estate professionals, noted that while the measures are positive indicators, their practical application remains to be seen.
Among the approved measures is an increase in the IRS tax deduction for rental expenses and a landmark reduction in the IRS rate on rental income from 25% to 10% for contracts deemed to be at “moderate rents.” The government also intends to simplify the existing rental laws. According to Ms. Barão, these changes are “great signs for the market,” but she cautioned that the definition of what constitutes a moderate rent is a critical, and as yet unanswered, question. “The great unknown is knowing what moderate values are. A couple with two children can only afford to pay €750 for a two-bedroom apartment,” she stated, highlighting the affordability challenges in major urban centers.
The government's strategy appears to be a direct response to the ongoing housing crisis, which has seen rents skyrocket, particularly in Lisbon and Porto. By making it more financially attractive for landlords to offer long-term rentals at controlled prices, the executive hopes to increase the housing supply available to residents. The reduction of the tax rate to 10% is a substantial incentive designed to draw properties out of the short-term tourist rental market and away from vacancy.
The announcement was made as part of a series of government initiatives. In a prior meeting, the Council of Ministers had already approved frameworks to utilize public buildings and land for the development of affordable housing. This two-pronged approach—mobilizing public assets and incentivizing the private market—signals a comprehensive effort to tackle the housing shortage. The simplification of rental laws is another key component, aimed at reducing the bureaucratic friction that has long been a complaint of both property owners and tenants.
Real estate analysts are now closely watching for the detailed regulations that will accompany these policy announcements. The specific value caps for “moderate rents” will be a determining factor in the policy's success. If the threshold is set too high, it may fail to produce the intended relief for the average family. Conversely, if set too low, it may not be attractive enough for landlords in prime locations to opt out of more lucrative arrangements.
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The measures are expected to be implemented in the upcoming fiscal year. For the thousands of families struggling with the high cost of living, and for the market itself, the clarification of these new rules is eagerly awaited. The government's intervention is seen by many as a necessary step to rebalance a market under immense pressure from international investment, tourism, and a structural lack of supply.
The focus on fiscal policy reflects a belief that market dynamics can be guided through taxation. The previous standard tax rate of 25% on rental income was often cited as a disincentive for landlords, pushing some towards the informal economy or the less-regulated short-term rental sector. The new 10% rate for compliant landlords is designed to bring more properties into the formal, long-term rental ecosystem.
The vice-president of APEMIP, Patrícia Barão, represents a key stakeholder group whose members—real estate agents and developers—are on the front lines of the housing market. Her cautious but optimistic reaction reflects a broader industry sentiment that acknowledges the positive intent of the measures while reserving final judgment until the full operational details are published. The effectiveness of this new housing strategy will ultimately be measured by its ability to make a tangible difference in the lives of those seeking a place to live in Portugal's competitive property landscape.
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