Housing Costs Outpace Wages, Socialist Chief Sounds Alarm for Portugal

Most newcomers notice it within weeks: salaries feel modest while rents feel sky-high. That tension, which has already pushed many young Portuguese to emigrate, is now at the centre of an increasingly heated domestic debate. José Luís Carneiro, the recently elected secretary-general of the centre-left Partido Socialista (PS), has seized on the issue, arguing that Portugal risks losing an entire generation if it cannot close the gap between rising housing costs and stagnant middle incomes.

Why the conversation suddenly matters to foreigners, too

A foreign professional moving to Lisbon or Porto today faces a market where the median rent for a new lease jumped to €16.4 per m² in January 2025, while the national net salary still hovers near €1,200 a month. Local anger over the disconnect is driving proposals that could reshape taxation, rental regulation and even the volume of public housing—policies that will inevitably touch expatriates who live and invest here. Carneiro’s argument is simple: without a decisive shift, Portugal will remain a bargain only on paper, and the social peace prized by many expats will fray.

A widening crack in the housing ladder

Portugal has logged the sharpest proportional surge in housing costs across the OECD since 2015, according to Eurostat. The squeeze is most acute for under-35s, three-quarters of whom still earn below €1,000 net, yet face Lisbon rents that routinely exceed €1,500 for a modest T1. Carneiro calls the trend "socially explosive" and blames what he terms government passivity. Municipal leaders, he says, have gone months without feedback from the Instituto da Habitação e da Reabilitação Urbana on stalled construction files, leaving supply chronically thin. Even the Porta 65-Jovem rent subsidy—expanded last year—barely dents the cost burden, covering at most 75 % of rent for limited periods.

Carneiro’s blueprint: modular homes, church partnerships and a fiscal carrot

The PS leader has laid out a short-term plan that mixes fast-build units with unusual allies. Within twelve months, he wants 2,000 modular houses placed on public land, prioritising teachers, nurses and police posted far from home. Over four years, a further 75,000–80,000 flats of roughly 100 m² would be offered at €90,000–€100,000 each, a price point designed to restore the historic rule of thumb that a home should cost no more than four times the average salary. While construction ramps up, Carneiro is courting the Catholic Church and non-profits to open vacant convents and dormitories as alojamento de urgência. Funding would, in part, come from channeling dividends of state-owned Caixa Geral de Depósitos to municipalities—a move he insists can be done without front-loading the national budget.

Pay-cheque reality check: getting to European averages

Carneiro’s housing ideas are welded to an income agenda. He argues that Portugal must converge with EU wage norms within a decade, which would push the current average net pay from €1,200 to roughly €1,900. His flagship promise is a "solid policy of raises and tax relief" focused on middle brackets, bolstered by a zero-rate VAT on essential foods to cushion living costs. The message resonates: Bank of Portugal data show that even after recent increases, 39 % of workers under 35 still clear less than €800 a month, a figure that barely covers rent in many suburbs.

What the numbers reveal—and hide

Official statistics offer a mixed picture. Employment grew 2 % last year and real wages inched up, yet property values soared 10 % nationwide. In Greater Lisbon, the average buyer now spends more than 12 years of their entire net income to acquire a one-bedroom flat. Analysts note that public land release could shave prices, but warn that incentives like the new 100 % loan-to-value mortgage guarantee for 18–35-year-olds might backfire by fueling demand faster than supply expands. Mário Centeno, governor of the central bank, cautions that "well-meaning credit schemes can lift prices unless accompanied by massive construction".

Economists and urbanists pick apart the plan

Housing specialists broadly applaud the emphasis on supply but fault the PS for skirting bolder steps such as reviving a national rent index or capping Airbnb conversions in heritage districts. They highlight Portugal’s 2 % share of social housing stock, one of the lowest in Europe, and urge a Norwegian-style public-private partnership model to reach at least 9 % by 2035. There is also pressure to curb speculative drivers like the Golden Visa and the Non-Habitual Resident tax regime, both of which activists claim inflate prices in central neighbourhoods. Carneiro has signalled openness to "re-evaluating" those incentives, yet stopped short of promising their abolition.

Reading the tea leaves: what expats should expect next

For foreigners already settled here, none of the proposals threatens an overnight upheaval, but a few trends are clear. First, rental inflation is likely to slow rather than reverse, because any large-scale construction will take years. Second, fiscal sweeteners for middle-income locals could translate into higher social-security contributions or a broader tax base if revenue projections fall short. Third, the political mood is tilting toward closer scrutiny of short-term rentals and residency-linked investment visas. Expats betting on capital appreciation may still find upside, but those seeking long leases should keep an eye on municipal pilot programs that could reserve new units for registered residents first.

In the end, Carneiro’s diagnosis—too little income chasing too much brick and mortar—speaks to a broader European story. Yet his push puts Portugal on notice: if the country wants both its own graduates and international talent to stay, it must make the words habitação digna more than a campaign slogan.