Portugal's National Monitoring Commission Flags RRP Housing Targets as Critical
The execution of Portugal's Recovery and Resilience Plan (RRP) is facing significant challenges, with the national monitoring commission (CNA-PRR) now classifying 24 investments as 'critical,' a 20% increase from its previous report. Among the most concerning areas are the country's housing initiatives, where ambitious targets are at risk due to systemic problems in the construction sector and administrative bottlenecks. The commission's latest report provides a stark assessment of the government's ability to deliver on its promises for affordable housing.
The policy objective to deliver 26,000 homes to families by the June 2026 deadline remains a central pillar of the RRP's social component. However, the CNA-PRR has identified this as a high-risk investment. The report states that a primary obstacle is the limited 'installed capacity in the country to respond to the various demands of civil construction.' This shortage of capable construction firms is compounded by difficulties in the preliminary phases of projects, before construction even begins. According to the Institute of Housing and Urban Rehabilitation (IHRU), as of April, contracts were signed with municipalities for 1,386 projects, totaling 21,162 housing units, of which only 1,950 have been delivered. An additional 1,218 units from 138 approved projects still lack signed contracts.
The government has established a special financing mechanism to ensure that projects completed by the June 2026 deadline receive 100% funding, which is intended to help meet the 26,000-home target. This mechanism could potentially support up to 59,000 homes, but any projects exceeding the deadline will only receive 60% financing from the State Budget or a loan from the European Investment Bank (EIB). The CNA-PRR criticized the lack of a 'fine analysis' of the impact of a decree-law related to this mechanism, concluding that 'the probability of realizing the totality of the dwellings proves to be low' without a more detailed assessment of projects in advanced stages.
A second housing-related investment also deemed critical is the goal to provide 3,500 homes at accessible costs, including affordable, supported, and social rent options. This target was already significantly reduced from an initial 6,800 homes during the RRP reprogramming. Despite the lower ambition, the CNA-PRR reports that the risk level has not decreased. The commission considers the revised target still 'difficult to achieve.'
The difficulties in this area are numerous. There is a scarcity of bids from construction contractors, who argue that the government's official reference value for construction per square meter is too low compared to current market costs. Additionally, the IHRU is criticized for 'long' response times in processing applications. This has led to several public tenders being declared 'deserted' due to a lack of interested bidders, effectively stalling many projects before they can start.
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In response to these findings, the commission, led by Pedro Dominguinhos, has issued specific recommendations. It urges the government to 'analyze the possibility of increasing the reference value of construction per m2, bringing it closer to market conditions.' This adjustment would aim to make public housing projects more financially attractive to private construction companies. The commission also calls for an acceleration of 'decision-making processes, both in applications and in reimbursements,' to reduce the administrative delays that are hindering progress.
The report also touches upon other critical investments facing delays, including a major water infrastructure project where the contract award has been contested, and the development of business reception areas where progress has been minimal. In both cases, the CNA-PRR notes that it is 'materially impossible' to conclude the investments by the planned dates.
The overarching theme of the CNA-PRR's report is that while the RRP provides an unprecedented level of funding, its execution is fraught with challenges that are deeply embedded in the country's administrative and economic structures. The housing sector, in particular, serves as a clear example of how financial resources alone are not sufficient to overcome issues like limited construction capacity and bureaucratic inefficiency.
The commission's continued flagging of these investments as critical serves as a formal warning to the government that without significant procedural and policy adjustments, some of the most important social and economic goals of the RRP may not be met. The future of Portugal's housing market, and the well-being of the thousands of families awaiting affordable homes, depends on a swift and effective response to these identified risks.
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