Montenegro Shelves Rent Caps, Bets on a Building Boom

Europe’s executive arm urged Lisbon last month to tame housing costs by capping rents and tightening rules on short-term tourist lets. Prime Minister Luís Montenegro, who took office in April at the head of the centre-right Democratic Alliance, has now made clear that his administration will not follow that playbook. In the Government Programme delivered to parliament the cabinet insists that helping vulnerable tenants through targeted subsidies, not blanket price ceilings, is the safest route to calmer markets. The document argues that previous experiments with caps and forced contracts “scared owners away”, shrank supply and ultimately pushed asking prices even higher. For foreign residents who depend on the private rental market, that stance means monthly payments will continue to be set by demand, though a revamped rent-support scheme—still being drafted—should cushion lower-income households, including non-Portuguese citizens with legal residence.

Brussels’ recommendation came after five consecutive years in which Portuguese sale prices climbed faster than any other euro-area economy—16.3 percent in the twelve months to January alone—while wages trailed far behind. Commission economists warned that the imbalance risked eroding competitiveness and deterring skilled migrants. Their report also called for stricter limits on Local Accommodation, the Portuguese category that covers Airbnb-style rentals.

Montenegro’s programme is silent on fresh nationwide limits, because the main lines of policy were redrawn last autumn. A decree issued in October 2024 scrapped most of the nationwide curbs introduced by the previous Socialist government and returned licensing power to municipalities. Today, city halls in Lisbon, Porto and several coastal resorts decide whether to freeze new permits or carve out “containment zones”. Foreign owners who already hold a licence may again transfer it when they sell, and permits no longer expire after five years, but town councils can still impose their own renewal schedules. For newcomers considering a buy-to-let investment, the key is to verify the local rulebook—Lisbon’s historic centre, for instance, has a six-month moratorium while a new zoning map is drafted.

Montenegro's Bet on the Building Boom

Instead of rent caps, the cabinet wants a construction surge. It has pledged to put 59 000 state-backed homes on the market by 2030, more than half of them financed by the EU Recovery and Resilience Plan. Brussels has doubts about whether 26 000 units can be delivered by the fund’s 2026 deadline; work was slow to start and Portugal’s building sector faces labour shortages. To speed things up the government is waiving several municipal fees, expanding fast-track planning for private-public partnerships and offering tax breaks for build-to-rent schemes. Empty public buildings—from army barracks to disused post offices—are being catalogued for conversion, an approach that matches a Commission request to mobilise vacant stock.

For expatriates already settled in Portugal the immediate upshot is continuity: market-rate rents remain legal, short-term rental hosts must watch municipal decisions rather than national edicts, and large-scale public housing is still years away. Prospective movers, meanwhile, should brace for competitive urban markets this summer but may benefit from a loosening of planning red tape that could enlarge the pool of long-term rentals in the medium term. For both groups the rule of thumb remains unchanged: check the local council website before signing a lease, buying property or applying for an Alojamento Local licence, because in today’s Portugal housing policy is increasingly decided street by street rather than in the halls of parliament.