Portugal Proposes a Ban on New Short-Term Rental Licenses

On 16 February 2023, Portugal's Council of Ministers approved a housing package that proposed to stop the issuing of new short-term rental licenses, with an exception for the rural interior. The plan, called Mais Habitação (More Housing), also proposed to reassess every existing license in 2030, to put a new levy on the homes that stayed in the trade, and to give owners who switched to long-term renting a zero rate of income tax until 2030.

Prime Minister António Costa presented it at a press conference with Finance Minister Fernando Medina and Housing Minister Marina Gonçalves. Reuters put the package at 900 million euros. None of it was law at the end of the month. The government said the measures would be open to public discussion for about a month and would then return to the Council of Ministers of 16 March for final approval, some as government acts and others as a bill to parliament.

What the government proposed

Portugal licensed short-term rentals under a regime called alojamento local, or AL. The government's own account of the meeting, published that day, listed four measures for it.

• New licenses. The issuing of new AL licenses would be prohibited. The exception was rural accommodation in interior municipalities where, the government said, there was no urban pressure and the rentals could help the local economy.
• Existing licenses. Current licenses would be reassessed in 2030 and periodically after that. The Portuguese news agency Lusa reported the interval as every five years.
• A levy. An extraordinary contribution would be charged on AL to pay for housing policy.
• A way out. Owners who moved a home from AL to residential renting by the end of 2024 would pay a zero rate of IRS, the income tax, until 2030.

On 20 February the government put the package on its ConsultaLEX consultation portal and published a questions-and-answers document. It said the AL regime was not ending and that nobody with a license would lose it: only the granting of new licenses would be suspended, in certain zones of the country. Only rural accommodation could apply for a new one, and any new license would run for five years. Which interior municipalities would be exempt was still to be defined.

The same document added detail that the government's account of the meeting had not carried.

• The levy, given the initials CEAL, would take account of operating income, the trend in rents and the weight of AL in the area. The money would go to the Instituto de Habitação e Reabilitação Urbana, the housing institute known as IHRU.
• A condominium owners' assembly could oppose AL in a unit of its building wherever it had not authorized the activity beforehand. Cancellation of a registration would mean the rental had to stop operating immediately.
• A registration would not pass to a buyer. The document said the registration number was personal and could not be transferred.

Why the government acted

Housing costs were the stated reason. Reuters reported that more than 50% of Portuguese workers earned less than 1,000 euros a month in 2022, that rents in Lisbon jumped 37% in the same year, and that inflation stood at 8.3%. Costa told the news conference that the crisis was affecting all families and not only the most vulnerable.

The AL measures sat inside a wider plan that also proposed to end the granting of new Golden Visas, a scheme that Reuters said had attracted 6.8 billion euros of investment since 2012. Medina put a price on the whole. “The estimated value of the programme we are presenting today is around €900 million,” he said, in remarks reported in English by Portugal Resident. He added that the estimate left out what rents, works and purchases might cost.

For short-term rentals, Costa stated the aim plainly. In Lusa's English report, he called the new rules a “strong incentive to return to the housing market housing units that are currently dedicated to short-term rentals.” He also said existing licenses would stay valid until 2030, which he described as seven years of guarantee for people who had invested.

What hosts and the tourism trade said

The hosts' association answered the same day. The Associação do Alojamento Local em Portugal, known as ALEP, said in a statement carried by Lusa that the government wanted to end AL after 2030, and that the end of current registrations in 2030, the reassessments every five years and the extra tax would make private investment unviable. Its president, Eduardo Miranda, said the association had not been heard on the measures by any government representative.

ALEP argued from numbers. It cited 723,000 empty properties in Portugal and put AL at 100,000 units, most of them outside the urban centers. Miranda told the news site ECO that 70% of the homes in AL were vacation houses outside Lisbon and Porto and that most would not move to the long-term market. He said AL accounted for 42% of tourist overnight stays in Portugal, and predicted that after 2030 most of those homes would be shut up again or rented illegally.

The hotel trade in the south took the same side. On 20 February the Algarve Association of Hotels and Tourism Developments, AHETA, said the draft would kill the short-term rental sector without adding homes for residents. Many owners, it said, had borrowed to turn what it called parallel beds into legal tourist accommodation. It complained that “the rules of the game have been changed in the middle of the championship.”

Others doubted the plan from the opposite direction. Reuters reported housing groups as saying the package would count for little while the government went on courting wealthy foreigners with other policies, among them the Digital Nomads Visa brought in the previous October.

By the end of the month the sector was organizing. On 27 February an ALEP delegation led by Miranda met the Secretary of State for Tourism, Commerce and Services, Nuno Fazenda. Miranda said the association would join a protest called for 1 March by AL owners and the cleaning and laundry businesses tied to them, at the Lisbon venue where the BTL tourism fair was due to open.

Who held the licenses in Lisbon

Figures from a Lisbon city council report, released on 28 February as the basis for a proposed review of the city's own AL regulation, described the kind of host the national plan would reach. The council said 73.6% of license holders in the city were individuals and almost 70% of holders had a single unit. The figures also showed what the threat of a freeze could do. The city's announcement at the end of 2021 that it meant to suspend new licenses set off a rush for them, and a large part were never used. Only about 36% of licensed units were active, the council said. It called the rest ghost licenses.

What it meant for hosts

For someone running a rental in Portugal at the end of February 2023, nothing had changed in law. What had changed was the planning.

• The consultation. The package went on ConsultaLEX on 20 February, with final approval set for the Council of Ministers of 16 March. A host who wanted a say had weeks.
• An existing license. The government said nobody would lose one and that all would be reassessed in 2030. Renovations and loans had to be weighed against a seven-year guarantee.
• A purchase. A buyer could not count on a seller's registration, which the government described as personal and not transferable, or on a new license outside the rural interior.
• An apartment. Where the owners' assembly had never authorized the activity, the assembly would be able to oppose it.
• The budget. A levy was proposed, and the government's questions-and-answers document gave no rate for it. The offer of a zero tax rate for switching to long-term renting ran only to the end of 2024.

Sources

1. Government of Portugal (XXIII Governo), Governo aprova pacote Mais Habitação (16 February 2023).
2. Government of Portugal (XXIII Governo), Mais Habitação - Perguntas e Respostas (20 February 2023).
3. Government of Portugal (Arquivo.pt capture of 22 February 2023), Mais Habitação: Perguntas e Respostas (questions-and-answers document) (20 February 2023).
4. ConsultaLEX (Government of Portugal), Consulta - Mais Habitação (20 February 2023).
5. Reuters (via KFGO), Portugal ends Golden Visas, curtails Airbnb rentals to address housing crisis (16 February 2023).
6. Portugal Resident, Government unveils measures to bolster housing market (16 February 2023).
7. ECO News (Lusa), No new licences for short-term rentals except in rural areas (17 February 2023).
8. Observador (Lusa), Associação do Alojamento Local em Portugal diz que Governo quer acabar com o setor (17 February 2023).
9. ECO, Investidores duvidam das “boas intenções” das medidas do Governo (17 February 2023).
10. ECO News (Lusa), Algarve tourism property owners push back against housing package (20 February 2023).
11. Notícias ao Minuto (Lusa), Programa Mais Habitação do Governo "mata setor do alojamento local" (27 February 2023).
12. idealista/news (Lusa; Arquivo.pt capture of 28 February 2023), Alojamento Local "fantasma" em Lisboa: 2 em cada 3 não tem atividade (28 February 2023).
13. Portugal Resident, ‘More Housing’ programme approved in Parliament (20 July 2023).
14. Portugal Resident, Government revokes “AL” (short-term holiday rentals) restrictions (25 October 2024).