Unlocking Portugal's Empty Flats: Tax Cuts and a 10-Year Rental Pact

Portugal’s perennial housing headache is back in the headlines. Rents keep climbing, landlords remain wary of new contracts, and a presidential hopeful—Luís Marques Mendes—is trying to persuade voters that a swift revamp of the rental market can cool the crisis faster than building cranes ever could.

Snapshot for busy readers

• 6.94 % rent update kicks in January, one of the steepest hikes in a decade.

• Tax cuts for landlords and bigger IRS deductions for tenants top next year’s policy menu.

• Marques Mendes wants a 10-year rule book that Parliament can’t tinker with.

• Property-owner associations back stability, while some economists doubt incentives alone will unlock empty flats.

• Supply is finally rising—up 49 % in early 2025—but still trails demand in Lisbon, Porto and Coimbra.

Why Portugal is still talking about rents

Even after a record 81 % jump in advertised listings during 2024, tenants from Braga to Faro keep bidding against each other for scarce flats. Median rents hit €1 400 this autumn, and in Lisbon the going rate is €22.2 /m². Coimbra posted the fastest rise—21.1 % in June—confirming what students already know: pockets hurt nationwide. Economists trace the squeeze to slow construction, a post-pandemic influx of digital nomads, curtailed mortgage access in 2023 and a lingering trust gap between State and landlords.

Marques Mendes: “Confidence before concrete”

The former PSD leader, now running for Belém, brands the current housing scene a “nightmare.” His plan rests on three planks:

Cut the IRS rate on rental income from 25 % to 10 % for leases below €2 300.

Seal a 10-year legislative truce so that no government can spring unexpected rules such as the aborted coercive letting scheme.

Open public land to housing cooperatives, driving below-market prices for middle-income families.

Marques Mendes argues these moves would release thousands of prédios devolutos without waiting for cranes to finish new towers. He calls the idea of forced leasing “absurd” and claims only a predictable framework can thaw relations with owners who pulled properties into short-term tourist lets.

Government’s 2025 playbook

The centre-right cabinet’s banner programme—Construir Portugal—leans on sweeteners rather than sticks. Key items include:• Scrapping the 2 % rent cap for new contracts so owners can price units realistically.• A progressive IRS credit that reaches €1 000 a year for tenants by 2027.• Faster eviction procedures when rent goes unpaid.• VAT relief on construction materials still under study, after builders warned high costs stall projects.

Ministers say these tweaks, plus tighter rules on Alojamento Local and the sunset of the Non-Habitual Resident regime, freed more than 15 000 units for long-term leases in the past twelve months.

Industry cheers, economists squint

Five heavyweight bodies—AICCOPN, ALP, APEMIP, APPII and APFIPP—issued a rare joint memo lauding both the tax carrot and the stability pledge. They want “a wave of confidence” to end frozen rents pre-1990, add legal balance to contracts and let private capital handle social housing where the State falls short.

Academic voices are cooler. Professor Paulo Trigo Pereira warns that without mass public construction, incentives may simply inflate prices. Other analysts doubt whether a flat 10 % tax rate is enough when owners can still earn more on daily rentals to tourists, even with heavier regulation.

Reading the latest numbers

• Offer side: Listings up 67 % in Q2 2024, 59 % in Q4 and another 49 % year-on-year in Q1 2025.• Demand side: Each Idealista ad drew 17 contacts in Q2 2025, down from 32 a year earlier—signalling relief but still brisk traffic.• Prices: National average rent rose 10 % y-o-y in November; Lisbon sits 40 % above pre-pandemic levels.• Inflation indexation: The automatic update formula adds 6.94 % to existing leases on 1 January.

Will stability unlock idle apartments?

Landlords who kept properties empty—or listed them on Airbnb—cite three anxieties: tax unpredictability, slow courts and a fear that future governments could revisit rent freezes. A decade-long pact might calm nerves, but housing NGOs caution it could also lock in renter insecurity if wages lag price growth.

What tenants should monitor next

Tenants weighing whether to renew or relocate can keep an eye on:

Parliament’s vote on the 10-year stability accord, pencilled for the spring session.

The final wording of the eviction-fast-track law—critical for risk-averse owners.

Municipal plans to release fresh building plots, especially in Greater Porto and the Algarve.

Any move on 6 % VAT for construction, which could shave costs for new build-to-rent schemes.

The roll-out of co-operative housing pilots in Lisbon’s Alta de Lisboa and Porto’s Campanhã.

If even half the promised measures survive legislative wrangling, analysts say the country could see 25 000 new long-term rentals by 2027. Whether that volume is enough to tame prices—or simply stabilise them at today’s lofty plateau—will shape Portugal’s urban future for years to come.