59,000 Pre-Approved Homes Never Got Built — APPII Says Regulation and Costs Are Choking Portugal's Housing Supply
Some 59,000 pre-approved housing units in Portugal were never built over the past three years because rising costs, 23% VAT, and unpredictable regulation made them financially unviable, says the APPII. The industry body estimates 50,000 more could be unlocked with a permanent VAT cut.
Approximately 59,000 housing units that received pre-certification in Portugal over the past three years were never built, according to Manuel Maria Gonçalves, CEO of the Portuguese Association of Real Estate Developers and Investors (APPII). Speaking this week, Gonçalves said the bottleneck is not a lack of willingness from the private sector but a regulatory and cost environment that makes middle-income housing projects financially unviable.
The figure — equivalent to roughly two full years of Portugal's recent housing construction output — underscores a structural failure in the country's response to its deepening housing crisis. Pre-certification means a project has cleared initial planning approval but has not progressed to the construction phase. That 59,000 units stalled at this stage suggests the problem lies not in planning permission backlogs, which the government has repeatedly targeted with reforms, but in the economics of actually building.
What Is Killing Viability?
Gonçalves pointed to several converging pressures. Construction costs in Portugal have risen sharply, with delays alone adding an estimated EUR 500 per square metre annually to project budgets. Labour scarcity in the construction sector — a problem across Southern Europe — has pushed wages higher without a corresponding increase in productivity.
The RGEU (Regulamento Geral das Edificações Urbanas), Portugal's general building regulations, was singled out as a major driver of disproportionate cost increases. Gonçalves argued that the regulatory framework creates ambiguity that allows inconsistent interpretation by municipal authorities, adding unpredictability to licensing timelines and project budgets.
Portugal also carries what the APPII describes as the highest tax burden on construction in Europe. VAT on new housing construction is charged at the standard 23 per cent rate, compared with reduced rates in countries such as Spain (10 per cent), France (5.5–10 per cent for social housing), and Poland (8 per cent). While a temporary VAT reduction exists for affordable housing projects, its expiry date of 2032 creates uncertainty for developers planning long-cycle investments.
The Maths of Middle-Income Housing
The core problem, according to the APPII, is arithmetic. Land prices in Lisbon, Porto, and the Algarve have risen 40 to 60 per cent since 2019. When combined with 23 per cent VAT, rising material costs, and unpredictable licensing timelines, the minimum viable sale price for new construction in metropolitan areas has been pushed well above what a median-income Portuguese household can afford.
A household earning the national median wage of roughly EUR 1,200 net per month cannot service a mortgage on a property priced above approximately EUR 150,000 — assuming a 30-year term, 3.5 per cent interest rate, and the standard banking threshold of 35 per cent debt-to-income. Yet new-build apartments in greater Lisbon now rarely come to market below EUR 250,000, and in Porto the floor has risen above EUR 200,000.
The result is a market that builds for the upper end — foreign buyers, golden visa investors, and high-income domestic purchasers — while the middle class that most needs new supply is priced out.
What APPII Wants
Gonçalves called for several policy changes. First, making the reduced VAT rate on affordable housing permanent and applying it retroactively, which he estimated could unlock an additional 50,000 units. Second, streamlining and standardising building regulations to reduce municipal discretion and speed up licensing. Third, creating a more predictable regulatory environment so that developers can underwrite projects with confidence over multi-year construction cycles.
The government has not responded directly to the APPII's figures. The Montenegro administration has focused its housing policy on demand-side measures — rent subsidies, public housing rehabilitation, and the Mais Habitação programme — while supply-side reforms have moved more slowly. The Simplex Urbanístico licensing reform, passed in 2023, was intended to cut approval times but has had uneven implementation across municipalities.
A Structural Problem With No Quick Fix
Portugal's housing deficit is estimated at between 100,000 and 200,000 units, depending on the methodology used. With annual construction completions running at roughly 25,000 to 30,000 units per year, closing that gap would take a minimum of four to seven years even at current rates — and the 59,000 stalled pre-certified units suggest that the pipeline is leaking badly before projects even break ground.
For the thousands of Portuguese families and young professionals competing for a shrinking stock of affordable housing, the APPII's data confirms what many already suspect: the crisis is not just about demand outstripping supply, but about a system that makes building affordable homes nearly impossible.