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Government to Create New Affordable Rents Program

16 September 2017

In the Major Planning Options for 2018 (GOP2018), the Portuguese government will create a new Affordable Rents Program with the objective of “promoting a broader housing rental offer at lower costs.”

With this proposal, the government intends to attend to the needs of middle-income families who currently have difficulty accessing the housing market in some areas of the country without imposing an excessive burden on the family budget.

Through this program, the executive will seek to adapt existing programs, both in support of demand, namely the Porta 65 – Youth Program and investment support, namely the Renovation for Rental Program, “to ensure full articulation and complementarity with the Affordable Rents Program, optimising the array of supports.”

The GOP2018 proposal will, in the medium term (eight years), increase the amount of publicly supported housing compared to the existing housing stock, lowering the weight of expenses relating to home rentals, to converge with the current European average.

In fact, the topic of urban leasing is in vogue, with the Urban Housing Market Monitoring Commission (CAMAU), meeting this week to define a joint position to boost the rental market, issuing proposals for the 2018 State Budget.

CAMAU is expected to propose an Affordable Rents Program to promote the provision of affordable housing for middle-class families, with rents at prices between 200 and 400 euros (for two- and four-bedrooms, respectively). It would also extend the Affordable Rents Program to private citizens, through the program’s requirement to set aside 20% of new urban developments for lower-income housing.

Regarding other urban rental issues, CAMAU argues that rental taxation should be favoured over taxation based on ownership. The IMI should be deductible as withholding at the time of the taxation of the rental income obtained through the leasing takes place. It also proposes exempting residential properties leased under the concept of “affordable income.” from IMI and AIMI. The commission also recommends eliminating the IMI surcharge (AIMI), a tax that benefits neither the State nor its citizens, and only has a negative impact on economic security and the perception of potential investors.

CAMAU also advises the Government to reduce the Withholding Tax (currently 28%) to 25%, giving the market a positive signal that the dynamization of urban leasing is effectively a national priority. It also supports the reduction of IRS taxation for long-term leases, reducing by 50% the value of the withholding tax applicable to contracts of five years or more. Also, property owners who opt for long-term rentals should see their tax rate drop from the current 28% to 12.5%.

The Commission also calls for the creation of a compulsory, non-speculative and simple income insurance scheme, and the creation of mandatory multi-insurance, to be contracted by the lessee, to cover any damages to the property caused by the tenant.

The Confederation of Trade and Services of Portugal (CCP), the Lisbon Tenant’s Association (AIL) and the Portuguese Association of Realtors and Real Estate Agents (APEMIP) all signed CAMAU’s proposal.

Original Story: Jornal Econômico – Fernanda Pedro

Translation: Richard Turner