The current Portuguese Government has made housing a national priority — and acknowledges that the response requires an integrated approach: a package of measures affecting multiple fronts and operating on different time horizons, all pursuing the same overarching goal: to increase the supply of homes for purchase and for rent, mobilising both the public and private sectors.
A European context that accelerates the agenda
This reform is aligned with the European plan presented in December 2025, in which the European Commission put forward a broad set of measures, including:
- Incentives for housing construction, with a focus on vacant homes, renovation, and the conversion of buildings;
- Simplification of construction rules, including licensing, administrative procedures, and building codes;
- Review of State aid rules, making it easier for Member States to invest in affordable and social housing;
- Reforço das verbas europeias, via orçamento da UE a longo prazo, fundos de coesão, programa InvestEU e Banco Europeu de Investimento (BEI);
- Measures to curb real estate speculation, with greater transparency in the sector
- Nova lei sobre o Alojamento Local, criando um quadro jurídico que permita às autoridades locais agir (com previsão de conclusão em 2026);
- Mobilisation of investment for university student residences..
Portugal: progress despite setbacks
In Portugal, sector reform has faced setbacks and delays linked to political instability and minority governments. Even so, several relevant measures have recently been approved, with a direct impact on investment, construction, and the rental market, and their entry into force is awaited with expectation:
- VAT reduction to 6%: applies to the construction and refurbishment of buildings intended for rental housing (up to rents of €2,300/month) and also to construction for sale up to €648,000.
- Increase in IMT for non-resident buyers: those who do not live in Portugal and seek to purchase second homes will see this tax rise (with emigrants excluded from this increase).
- Taxation of “moderate rent” lease agreements: reduction of the IRS rate applicable to these contracts from 25% to 10%
- Higher tax deductions for tenants: a direct incentive to ease the tax burden on those living in rented housing.
- Isenção de IRS e IRC para contratos de arrendamento com rendas de valor moderado (20% inferiores à mediana do concelho).
- Removal of the 2% cap on rent increases for new contracts where the property has been in the rental market in the last five years and rents are higher than those set out in the Rental Support Programme.
- IRS capital gains exemption when reinvested in properties intended for moderate-value rental: anyone selling a home and applying the proceeds to a property for rental will benefit from a more favourable tax treatment.
- Simplification of licensing processes: an intention to reduce prior controls and speed up procedures under the legal framework for urbanisation and building.
- New framework for Investment Contracts for Leasing (CIA): tax benefits for investors in construction, refurbishment, or acquisition of properties for rental, for up to 25 years.
A “third package” on the way
The Minister of Finance has also announced a third package of measures, described as “legal improvements” to “increase supply”, intended to apply on a temporary basis, “so that they can be studied and assessed at the end of this legislature”, in 2029, and “eventually corrected and improved”.
Among the measures expected are:
- Faster eviction procedures;;
- Creation of a housing emergency fund;;
- Faster resolution of undivided inheritance situations involving real estate.
Measures already in force and fully active
It is worth recalling that the following measures are already in force and operational:
- Support for the purchase of a first home (young people up to 35 years old): full exemption from IMT and Stamp Duty for homes up to €330,539 (in force in 2026).
- 100% public guarantee: the State guarantees up to 15% of the property value (for values up to €450,000), enabling 100% financing for the first home, available until 31 December 2026.
- New Land Law (Lei dos Solos): creates a special framework for land reclassification, allowing rural land to be converted into urban land more simply, with the aim of increasing the supply of land for housing construction at controlled costs.
What changes for citizens and investors?
For citizens
For individuals who rely on passive rental income, these measures may produce two tangible effects: lower direct tax burden and some additional protection. Increased deductions for tenants and a more flexible cap on rent increases tend to benefit those already active in the market.
For investors and developers
For those looking to invest in real estate or build to rent, the tax measures may improve project economic viability — particularly for projects targeting more affordable market segments. Regulatory and bureaucratic risk may also be reduced, provided that the criteria are regulated clearly.
For the speculative segment and foreign buyers
For more speculative market activity or direct foreign buyers, there is a clear signal of protection for the local market. Even so, the luxury segment is unlikely to be significantly affected (it has grown exponentially in Portugal), nor is investment via regulated collective investment vehicles (such as investment funds) with professional management, which allow individual investors to invest without administrative concerns.
Taken together, these measures show a shift in focus: less piecemeal intervention and a stronger attempt to create structural conditions to increase supply — whether through tax policy (VAT, IRS, exemptions, and capital gains), administrative reform (licensing), or the creation of instruments to attract long-term investment. At the same time, the political signal is clear: to prioritise residents’ access to housing and encourage more moderate rental models, without “closing the door” to foreign investment that supports these objectives.
The real test, however, will be implementation: the speed at which measures move from paper to practice, the regulatory stability required to plan investments with confidence, and the ability to measure outcomes. If implementation is consistent and the assessment mechanisms in 2029 are used to correct shortcomings, this reform could represent a decisive step towards balancing the market and restoring predictability for citizens and investors.
