Portugal's Empty Housing Crisis and Tax Solutions
Housing academics across Portugal are urging the government to increase property taxes on vacant homes—a strategy supported by the European Commission that could help unlock thousands of empty apartments while renters struggle to find affordable housing.
Why This Matters
• Over 725,000 homes sit vacant in Portugal, roughly 12% of the total housing stock, while prices have risen significantly since 2015.
• The European Commission supports higher IMI taxes on empty properties, shifting focus beyond short-term rentals to address broader vacancy issues.
• Tax measures for developers and sellers face scrutiny over whether they genuinely deliver affordable housing.
• The Portuguese state holds significant quantities of disused buildings but lacks a complete inventory of its holdings.
The Academic Case for Stronger Empty-Home Penalties
Rede H, a network of housing-policy researchers, presented recommendations to the European Commission regarding Portugal's housing crisis. The network identified two key issues: inheritance disputes that leave properties frozen for years, and real-estate investment funds holding apartments off-market to maximize returns.
Researchers argue that increasing the Municipal Property Tax (IMI) on long-term vacant units is an effective tool to encourage idle inventory into circulation. Current law already increases the IMI rate for homes empty over one year. However, enforcement remains inconsistent across municipalities, and outdated property valuations mean penalties often remain modest.
The European Commission's report notes that Portugal holds one of the highest shares of non-primary-residence housing in the OECD and recommends shifting fiscal pressure from transaction taxes to recurrent levies that discourage underutilization of property.
What This Means for Residents
If IMI surcharges on vacant homes are increased, property owners facing higher tax bills would have stronger incentive to either sell or lease their properties, potentially easing supply constraints in major cities where vacancy coexists with acute housing shortages. For renters, this could mean modestly more inventory, though researchers warn relief will be limited unless paired with public-housing expansion and administrative reform.
Homebuyers should note that updating property valuations—a Commission recommendation—would affect IMI bills. Landlords with empty apartments face exposure if stricter enforcement occurs; tax penalties could substantially increase their holding costs.
The State's Role in the Housing Market
Researchers have criticized the Portuguese government's management of its own property portfolio. Official estimates suggest the state controlled roughly 15,000 surplus buildings, though the current inventory remains unclear. Since 2024, authorities have transferred state-owned buildings to municipalities for rehabilitation projects, but progress remains slow relative to housing demand.
Portugal has allocated significant Recovery and Resilience Plan funds toward housing rehabilitation and construction, though timelines and delivery remain uncertain given construction bottlenecks.
The Debate Over Tax Breaks for Builders
Researchers and the European Commission both question the effectiveness of recent fiscal measures aimed at developers. While reduced VAT rates and capital-gains incentives are intended to encourage housing supply, critics argue such measures risk simply redirecting capital without materially lowering rents or expanding genuinely affordable housing. The Commission noted that subsidies risk benefiting developers already planning construction rather than catalyzing net-new affordable projects.
Social Housing and Supply Gaps
Portugal lags behind the European average in public and social housing provision. Researchers advocate increased public investment, wider deployment of EU support mechanisms, and greater involvement of cooperatives, non-profit developers, and community initiatives in housing delivery.
The network also called for targeted support for vulnerable groups: young adults, elderly households, single-parent families, immigrants, and essential workers priced out of job-rich areas. Current subsidy schemes, they argue, require improvement in targeting and transparency.
Unblocking Property Disputes
Among reforms researchers champion is streamlining legal processes around inherited properties where heirs cannot agree on disposition—cases where properties remain frozen for years. Simplifying such procedures could mobilize property back into the market.
Moving Forward
The European Commission has positioned affordable housing as a core economic priority. The Commission's framework emphasizes boosting supply, mobilizing investment, enabling immediate relief, and protecting vulnerable populations.
For residents, the practical outlook is this: expect renewed focus on property tax enforcement for vacant homes, continued government efforts to rehabilitate public buildings for rental, and ongoing debate about whether developer incentives truly expand affordable housing or primarily benefit mid-market projects. Whether recent policy changes produce meaningful relief in tight rental markets remains to be seen.
