Government Approves Housing Package with Tax Incentives for Landlords and Tenants
The Portuguese Council of Ministers has officially approved a new package of legislative measures aimed at intervening in the country's housing market. The announcement, made this Thursday, confirms the government's strategy to address the ongoing affordability crisis through a series of fiscal incentives designed to moderate rental prices and increase the supply of long-term housing. The initiative is part of the broader national strategy to ensure access to affordable housing for all citizens.
The primary objectives of the new policy are to provide financial relief to tenants and to encourage property owners to place their homes on the long-term rental market. The government aims to achieve this by adjusting the tax framework for both parties. The measures are a direct response to the sustained increase in rental values, which has particularly affected major cities such as Lisbon and Porto, making it difficult for young people, families, and the middle class to find adequate housing.
The implementation strategy for this policy will be phased in, with the new tax rules expected to take effect from the next fiscal year, beginning in January 2026. The government will launch an information campaign to ensure that both tenants and landlords are aware of the new benefits and their obligations. The Ministry of Housing will oversee the implementation, in coordination with the Tax and Customs Authority (Autoridade Tributária e Aduaneira).
The measures specifically target two key population groups: tenants currently renting their primary residence and landlords who own residential properties. For tenants, the package includes a significant increase in the amount of rent that can be deducted from their taxable income (IRS), effectively reducing their overall tax burden. For landlords, the government is introducing a reduction in the autonomous tax rate applied to rental income, conditional on the properties being leased for long-term residential purposes.
A budget of approximately €200 million has been allocated for the first year of the program to cover the expected decrease in tax revenue. This funding is part of a larger financial commitment outlined in the State Budget for 2026, reflecting the high priority the government has placed on resolving the housing issue. The funding mechanisms will be managed through the national treasury, with the Institute of Housing and Urban Rehabilitation (IHRU) providing technical support.
The policy has received a mixed but generally positive reception from various stakeholders. The National Association of Tenants (Associação Nacional de Inquilinos) has welcomed the relief for renters but has called for more robust measures, including direct rent controls in high-pressure zones. Meanwhile, the Lisbon Property Owners Association (Associação Lisbonense de Proprietários) has praised the tax reduction for landlords, stating that it is a crucial step to incentivize the formal rental market and combat the underground economy.
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The expected economic and social impact is significant. Economists predict that the measures could lead to a moderation in the growth of rental prices within the next 18 to 24 months as supply increases. Socially, the policy aims to reduce the financial strain on families, improve housing stability, and counteract the trend of gentrification that has displaced long-term residents from central urban areas. The government hopes this will foster more cohesive and socially diverse communities.
The government has established a framework for monitoring and evaluating the effectiveness of the new measures. Key performance indicators will include the number of new long-term rental contracts registered, the evolution of average rental prices in major cities, and the uptake of the new tax benefits by both tenants and landlords. The IHRU will be responsible for collecting this data and will produce an annual report for Parliament.
For international context, similar policies have been implemented in other European countries facing housing pressures, such as Germany and the Netherlands. These countries have used a combination of tax incentives, rent caps, and investment in public housing to manage their markets. The Portuguese government has stated that it has studied these international best practices in developing its own unique approach tailored to the national context.
Political opposition parties have responded with cautious support, although some have criticized the measures as being insufficient. The main opposition party has argued for a more ambitious public housing construction program, while smaller parties on the left have demanded stricter regulations on the short-term rental market, such as those seen in Barcelona or Berlin. The debate in Parliament during the approval of the State Budget is expected to be intense.
Looking ahead, the government has indicated that this package is the first step in a longer-term legislative agenda for housing. Future developments may include a revision of the urban planning laws to streamline the approval process for new construction and further regulations for the 'Alojamento Local' (short-term rental) sector. The goal is to create a comprehensive and stable legal framework for the entire real estate market.
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