The entry into force of the tax package for housing is a positive step, but it must be viewed with realism. Although it does not, on its own, solve the problems of the housing sector, it sends a clear message: in Portugal, an increase in supply must be accompanied by a more balanced tax burden on those who create and make housing available to the market.
The question of time is, perhaps, one of the most decisive. Portugal’s housing crisis is not solved at the pace of political calendars, nor with measures designed only to produce immediate effects. Bringing a home to market is a slow process. For this reason, even well-intentioned tax measures may be doomed to failure if they are accompanied by excessive bureaucracy, legislative instability and successive changes in political direction on these matters.
For too long, the debate on housing has been trapped between two extremes. On one side, the idea that the market solves everything. On the other, the conviction that the State should control almost everything. The reality is simpler and less ideological: without supply, prices do not fall. And without the conditions for that supply to emerge, the crisis worsens.
Let us take it point by point. The reduction of VAT on construction from 23% to 6% may have a significant impact. In a sector where the costs of construction, financing, licensing and labour already weigh heavily on projects, the tax burden carries considerable weight. It can be the deciding factor between a project going ahead or being shelved. It may also create room for more projects to reach the market at prices compatible with the means of Portuguese families.
It is worth avoiding illusions. The VAT reduction does not automatically mean cheaper homes. For that benefit to reach families, there must be competition, predictability and adequate oversight. If the measure merely improves margins without increasing real supply, the objective fails entirely.
The same applies to the rental market. The reduction of the tax burden on personal income tax (IRS) and corporate income tax (IRC) on rents, within certain limits, could act as an attractive incentive for making more secondary properties available on the market. It is a positive measure, especially in a country where many properties remain empty out of fear, inertia or lack of confidence. Taxation is only part of the problem. Renting needs stability, swift dispute resolution, and rules that are clear for both landlords and tenants.
The proposal to resolve deadlocks in undivided inheritances also deserves attention. There is property lying idle for lack of agreement between heirs, through drawn-out proceedings, or through the absence of practical decision-making mechanisms. In a country with such housing pressure, leaving properties blocked for years is an economic and social waste. Freeing up this property may be as important as encouraging new construction.
The increase in property transfer tax (IMT) for non-resident foreigners raises a different question. Foreign investment is not, in itself, the housing problem. The problem lies in the imbalance between demand and supply, in the territorial concentration of that demand, and in the lack of homes available to those who live and work in Portugal. Since the 2011 crisis, the construction of new housing has slowed and has never again managed to keep pace with the demand that has continued to rise progressively. Penalising investment without correctly distinguishing between cases will drive away important capital without solving what is essential. Not to mention the potential illegality of this rule through breach of European law.
This tax package has merit because it starts from an essential principle: without incentives for supply, there is no effective housing policy. Nevertheless, it still fails to ensure its implementation on the ground. The measures need to be clear, simple and easy to apply, so that both the market and families know what they can count on.
The reduction of the tax burden can make a positive contribution. Even so, the true measure of success will be another: increasing the number of homes available at prices adjusted to families’ real incomes. Until that happens, we are far from a definitive solution.
