Government Launches 'Construir Portugal' Program to Tackle Housing Crisis
The Portuguese government has officially announced a comprehensive policy package named “Construir Portugal” (Build Portugal), designed to address the country's severe housing crisis. The program's primary objective is to increase the supply of affordable housing, particularly for the middle class, through a series of fiscal incentives, the mobilization of public assets, and significant regulatory simplification. This strategic initiative comes in response to a period of dramatic increases in housing prices and rental costs that have far outpaced the growth of average incomes.
A central element of the new policy is the introduction of a “moderate rent” scheme. To encourage participation from landlords, the government has approved a substantial reduction in the autonomous tax rate on rental income, from 25% down to 10% for those who adhere to the program's rent limits. For corporate landlords, the IRC tax rate will be reduced by 50%. In a move to further stimulate investment in this segment, the government will also provide an exemption from capital gains tax when a property is sold and the proceeds are reinvested in housing for the moderate rental market. Additionally, the VAT on construction for these projects will be lowered to 6%.
The program also includes measures to support tenants. The maximum allowable deduction for rental expenses in personal income tax (IRS) filings will be increased to €900 in 2026 and will rise further to €1,000 in 2027. This measure is intended to provide some financial relief to households struggling with high rental costs.
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Another key pillar of the “Construir Portugal” initiative is the use of state-owned assets to create new housing. The government has identified numerous underutilized public properties in key locations that will be made available for development through public-private partnerships (PPPs). The objective is to quickly convert these properties into controlled-cost housing. This effort will be supported by a €1.34 billion financing line, established in partnership with the European Investment Bank, which is earmarked for the construction or rehabilitation of 12,000 public housing units in the coming years.
To accelerate the delivery of these new homes, the government is also committed to streamlining the notoriously slow urban licensing process. Proposed amendments to the Legal Regime for Urbanization and Building are expected to reduce bureaucratic hurdles and shorten the timelines for project approvals. The successful implementation of this multifaceted program is seen as a critical test for the government, as it seeks to transform its ambitious legislative framework into tangible results that can alleviate the housing pressure felt across the nation. Understand policy impacts on your Portugal property plans at realestate-lisbon.com.