Portugal’s Rental Tax Cuts Aim to Boost Supply, Tenants Fear Price Hikes

Portugal’s newest housing incentives promise lighter taxes and cheaper builds, yet many in the rental trenches say the reality on the ground still feels painfully unchanged. Political will, investors’ expectations and tenants’ salaries are bumping into one another at Lisbon’s apartment doors.

Quick glance at the debate

• Cut VAT to 6% on new homes up to €648 000 and rents below €2 300

• IRS drops from 25% to 10% for landlords who accept “moderate” rents

• Capital-gains holiday if the sale profit returns to the rental market

• Tenants’ groups warn of a “perverse invitation” to raise asking prices

Tax carrots vs. market realities

The Government insists that shaving VAT and slashing the rental IRS rate will coax thousands of owners to list properties rather than leave them empty or pivot to short-stay tourism. Yet Lisbon Tenants Association vice-president Luís Mendes fears the measures could nudge landlords to price units just below the €2 300 ceiling, pushing the middle class further out. Economists at Nova SBE echo that concern, noting that a fiscal sweetener alone rarely defeats “location, location, location” — the trio of factors Mendes blames for runaway costs.

What has changed since 2023?

Since the controversial Mais Habitação package froze some rent hikes at 2%, Parliament has steadily walked that cap back. Today the annual update coefficient is 2.16%, and new contracts are free of any limit. Simultaneously, developers may request the new 23%→6% VAT refund within 150 days of a build’s completion — a window the construction lobby argues is still too long for tight project financing.

The tenants’ counter-proposal

Renters’ advocates want two extra pillars: a genuine national rental registry and an inventory of public buildings suitable for conversion. They argue that informal leases keep 1 in 5 contracts off the tax radar, distorting statistics and policy alike. By letting tenants themselves upload lease data to the Finanças portal, authorities hope to shed sunlight on a shadow segment worth an estimated €1.4 B in undeclared income.

Landlords’ doubts and the transparency gap

Property-owner associations welcome lower taxes but warn that bureaucracy, long court evictions and the AIMI surtax still dampen appetite. Diana Ralha of the Lisbon Landlords Association wants the wealth-tax-like AIMI scrapped for all rental stock, not only for build-to-rent ventures. Without that signal, she argues, institutional funds will steer capital toward Spain or Italy where yields rival Portugal’s but rules feel clearer.

Young buyers caught in the middle

For under-35s, the package waives IMT and stamp duty on first homes below the fourth tax bracket, and forces banks to offer softer stress-test criteria. Even so, the median Lisbon salary (€1 255) covers barely half the mortgage payment on a 80 m² flat priced at today’s metro average of €5 425/m². Analysts at Moody’s warn that unless incomes catch up, tax relief may simply translate into higher asking prices — déjà vu from the 2015 Golden Visa boom.

Is rent control back on the table?

Officially, Lisbon and Porto will not copy Berlin-style rent freezes. However, the Regime Simplificado de Arrendamento Acessível (RSAA) already ties full IRS exemption to rents 20% below the local median. Critics see that as de-facto price management; supporters call it a voluntary discount backed by carrots, not sticks. Brussels, meanwhile, urges Portugal to tighten rules on short-term lets before considering hard caps on monthly rents.

European lens: how Portugal compares

Roughly 16 EU nations employ some form of rent control. Dutch leases face a point-based ceiling, Catalonia flirted with strict limits before courts struck them down, and Sweden blends collective bargaining with municipal supply. Portugal’s hybrid path — fiscal incentives plus mild guardrails — is viewed by the European Commission as “progress, but incomplete” while a continental blueprint for Affordable Housing 2030 is drafted.

What happens next?

The Government needs opposition votes to pass the tax changes by year-end. If Parliament stalls, construction VAT and the 10% landlord IRS rate could slip into 2026, delaying projects already budgeted with those cuts in mind. Regardless of legislative calendar, demand will stay high as net migration nears 90 000 people a year and household formation outpaces new units. For tenants scanning the classifieds each morning, the pressing question remains: will any of this make the next lease renewal less frighteningly expensive?