The Government's Six-Pillar Plan to Fix Portugal's Rental Crisis

For decades, Portugal's rental market has been caught in a paradox: thousands of apartments sit empty while families struggle to find affordable housing. Many landlords simply refuse to rent, fearing non-payment, sluggish eviction processes, and a legal framework they perceive as stacked against them. The government of Luís Montenegro has made dismantling this distrust the centrepiece of its housing strategy, and on Thursday, the Council of Ministers is expected to approve yet another layer of reform — the latest in a series of legislative moves that began in May 2024.

The approach can be understood through six distinct pillars, each targeting a different source of friction in the rental ecosystem.

Reversing the "Mais Habitação" Legacy

The starting point was ideological as much as practical. The previous government's "Mais Habitação" programme had introduced two measures that provoked fierce resistance from property owners: coercive rental, which empowered the state to force landlords to place empty properties on the market, and an intermediary scheme where the state acted as a middleman between owner and tenant. Both were revoked in May 2024 under the "Construir Portugal" programme. Minister António Leitão Amaro described coercive rental as "highly punitive" and said it "punished private property" while creating a disequilibrium that discouraged landlords from participating in the market at all.

For anyone who has relocated to Portugal — or is considering it — this shift matters. The rental market's dysfunction directly affects newcomers, who typically rent before buying and face the same scarcity and inflated prices as Portuguese tenants.

Ending the 2% Rent Cap on New Contracts

In September 2025, the government announced what it called a "shock policy" for the rental market. The most symbolic measure was eliminating the 2% cap on rent increases for new contracts involving properties that had been rented within the previous five years. Introduced during the cost-of-living crisis, the cap had been designed to protect tenants but was widely blamed for freezing the market — landlords who couldn't adjust rents to reflect market conditions simply withdrew their properties.

The removal is a calculated gamble: the theory is that more supply, even at higher prices, will eventually moderate costs more effectively than price controls that shrink the pool of available housing.

Tax Incentives for Landlords

Alongside deregulation, the government has deployed fiscal carrots. Reduced tax rates on rental income are designed to make the mathematics of renting more attractive for property owners who might otherwise leave apartments vacant or list them on short-term platforms like Airbnb. The details vary by contract duration, with longer leases attracting more favourable treatment — an attempt to channel supply toward the stable, long-term rentals that families and workers need most.

Faster Eviction Procedures

Thursday's expected reforms target what many landlords cite as their primary concern: the difficulty of removing tenants who stop paying. The new diploma aims to streamline eviction processes in cases of repeated non-payment, accelerating court decisions while preserving safeguards for vulnerable tenants. It is a delicate balance. Landlords want certainty that they can recover their property; tenant advocates warn that faster evictions could leave the most fragile households — the elderly, families with children, low-income workers — exposed to sudden displacement.

Protecting Vulnerable Tenants

The government insists it has not abandoned social protections. Mechanisms for shielding tenants in situations of genuine vulnerability are built into the new framework, though critics argue the definitions remain vague and the enforcement uncertain. How these provisions work in practice will determine whether the reforms are seen as a genuine rebalancing or a tilt toward property owners at the expense of those who can least afford it.

Unlocking "Heranças Indivisas"

A quieter but potentially significant reform addresses inherited properties held in legal limbo. Under current rules, all heirs must agree before an inherited property can be sold or rented — a requirement that keeps an estimated tens of thousands of homes off the market. The government plans to allow a single heir to unblock the process, a change that could release meaningful supply over time.

Whether these six pillars will actually lower rents remains an open question. The structural deficit in new construction, rising land costs, and relentless demand from both domestic and international buyers continue to push prices upward. Fitch this week forecast a 15% nominal increase in housing prices for 2026, following an 18% rise last year. The government's reforms may slow the bleeding, but they are unlikely to cure the disease without a dramatic increase in the pace of building.

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