In recent years, the housing issue has become one of the main social and economic challenges in Portugal. The rising cost of living, rising prices in the real estate market and the shortage of affordable housing have exacerbated the difficulties for the lower-income population. In response to this problem, the Portuguese government has implemented a series of incentives to promote the construction of social housing, with the aim of offering decent and affordable housing solutions to the population.
1. 1º Direito Programme: One of the main government initiatives in this area is the “1º Direito” programme, which aims to promote the right to housing for people in situations of housing need. This programme, part of the New Generation of Housing Policies (NGPH), focuses on the rehabilitation of properties or the construction of new homes for families living in inadequate conditions. Municipal councils and other public entities have access to funding through the Institute of Housing and Urban Rehabilitation (IHRU) to carry out this type of project. This support includes the purchase of properties for subsequent adaptation, as well as construction from scratch on public or private land, with facilitated financing conditions, subsidies and credit lines at reduced interest rates. The “1st Right” also encourages cooperation between private entities, such as cooperatives and third sector organisations, which can be partners in the implementation of projects.
2. Tax Benefits: Another mechanism to encourage the construction of affordable housing in Portugal is the tax benefits granted to both construction companies and property developers. The partial or total exemption from Municipal Property Tax (IMI), the reduction or exemption from Municipal Property Transfer Tax (IMT), and the application of reduced VAT rates for construction or renovation works of social housing are some of the measures that facilitate the creation of more affordable housing. Furthermore, within the scope of the National Housing Strategy, the government has sought to streamline urban licensing processes, allowing projects intended for social housing to have priority in municipal councils, thus reducing bureaucracy and implementation times.
3. Recovery and Resilience Plan (RRP): With the arrival of European funds from the Recovery and Resilience Plan (RRP), Portugal has received a new boost to address its housing deficit. Part of this plan includes significant investments in the construction of affordable housing and the renovation of dilapidated buildings. The Portuguese government has earmarked a substantial portion of the funds for this sector, with the aim of creating thousands of new homes by 2026. The RRP also provides incentives for sustainability, with additional funding for constructions that use green technologies, promote energy efficiency and contribute to reducing the carbon footprint. Thus, in addition to addressing the issue of housing affordability, the government aims to align new construction projects with environmental and energy transition objectives.
4. Public-Private Partnerships: Another relevant incentive is the Public-Private Partnership (PPP) model, which allows the government to collaborate with the private sector in the creation of social housing projects. These partnerships are essential to increasing the supply of affordable housing, allowing the State to share the costs and risks of investment with companies and cooperatives, while ensuring that the target audience benefits from lower rental or purchase prices. PPPs can be especially effective in large cities, such as Lisbon and Porto, where construction costs and land values are higher. In these cases, the government provides financing facilities or the use of public land so that real estate developers can carry out projects of social interest.
5. Support for Urban Rehabilitation: In addition to the construction of new homes, the Portuguese government has encouraged urban rehabilitation, especially in metropolitan areas where there are vacant and dilapidated buildings. Through programs such as Reabilitar para Arrendar, the State finances the renovation of old properties so that they can be used for affordable rentals. This type of incentive contributes to the revitalization of urban areas, while also increasing the supply of housing without the need for new land.
Conclusion: The incentives offered by the Portuguese government for the construction of affordable housing reflect a commitment to improving housing conditions in the country. By combining financial support, tax benefits and strategic partnerships, the government seeks to balance supply and demand in the housing market, making access to housing an effective right for all citizens, especially for the most vulnerable. The continuity and improvement of these policies will be essential to address housing challenges and ensure a more inclusive and sustainable future for the housing sector in Portugal.
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