Funchal Election Puts Short-Term Rental Freeze on the Ballot

Homes in Funchal’s quiet suburban hills are suddenly a political battleground. With municipal elections only weeks away, nearly every candidate vying to run Madeira’s capital says the city must hit the pause button on new Alojamento Local permits inside ordinary apartment blocks. Their message resonates with residents who have watched rents climb at the same pace as tourist arrivals.

Pressure Cooker on the Atlantic

Madeira’s economy leans heavily on tourism, but short-term rentals have pushed long-term tenants toward the island’s outskirts, local housing activists argue. According to regional data, the number of Alojamento Local properties in Funchal has tripled since 2018, outpacing population growth by a factor of five. At the same time, the average lease for a two-bedroom flat rose above €1,000 per month—steep in a city where many salaries hover around the national minimum.

Candidates Read the Room

From the Partido Socialista to a centre-right coalition and even an independent ecologist slate, five of the six leading mayoral hopefuls now favour a moratorium on new licences inside residential buildings. They insist tourists will still find plenty of beds in hotels and registered guesthouses while locals regain access to housing. The lone dissenter, a liberal newcomer, warns that a blanket freeze could "send investors packing" and ultimately cost jobs in hospitality.

What a Moratorium Would Do—and Not Do

Funchal’s draft proposal, circulated at a recent council hearing, would stop new Alojamento Local registrations in multi-family buildings for up to 2 years while officials map out designated zones for tourism. Existing licences would remain valid, but landlords would need explicit condominium consent to renew. Urban planners say the rule would mirror Lisbon’s 2023 measure that capped short-term rentals in pressured neighbourhoods such as Alfama and Bairro Alto. Early indicators in the capital show a modest return of long-term listings, though critics note hotel prices climbed 11% after the cap.

Lessons from Mainland Portugal

Lisbon and Porto both froze new permits after vacancy rates plunged below 2%, and courts have so far upheld the restrictions. Yet those cities boast larger hotel pipelines than Funchal. Madeira’s tourism board fears that if cruise arrivals continue to break records—1.3 M passengers last season alone—limited apartment stock could strain the island’s accommodation capacity during peak holidays. Hoteliers counter that they have 700 new beds under construction, enough to absorb short-term shocks.

Legal and Fiscal Minefields Ahead

Under national law, municipalities can impose "containment areas," but they must justify the decision with hard data every 2 years. Property-owner associations are already preparing lawsuits, claiming any suspension amounts to an expropriation of income. Meanwhile, the regional government counts on roughly €8 M in annual tourist-tax revenue—much of it generated by Alojamento Local—to fund public transport upgrades. City hall insists a temporary halt will not derail those projects because existing rentals will still pay the levy.

Voices from the Ground

Maria Rodrigues, a nurse in Funchal’s São Pedro parish, says she spent 7 months hunting for an affordable flat after her landlord shifted to short-term lets. "If the politicians close that loophole, maybe I can move closer to the hospital again," she tells us. Across town, host Pedro Alves warns that sudden rule changes could leave him with an idle property and an outstanding renovation loan, adding, "Give us tax incentives to rent long-term before you slam the door on tourism."

A Broader Reckoning for Portugal’s Tourist Hubs

Whether the moratorium passes or not, the consensus among Funchal’s political class signals Portugal’s shifting balance between tourism income and housing stability. Similar debates are brewing in the Algarve, in the surfing enclave of Peniche, and on the Azorean island of São Miguel. For Madeirans, the upcoming vote will test how far the city is willing to go to protect residential life without puncturing the lifeblood of its economy.