Perspectives: The Brussels Bubble

Housing Crisis

Agustín Cocola-Gant: Lisbon is more attractive to investors than to its own citizens

When did the term “housing crisis” first enter the national vocabulary in Portugal?

Years ago. The housing crisis has been permanent in Portugal. Just to give you a context, since the end of colonialism and up until the 1990s there was much migration to Lisbon from colonies and rural areas with thousands of people living in very bad conditions. That was the first housing crisis at the end of the 20th century. 

Then something different happened with the 2008 financial crisis. Portugal, like Greece, was rescued by the troika, a lot of conditions were imposed on the government via the memoranda and some of these conditions were referred to the liberalization of the housing market. Landlords obtained more power, and it is very easy for them to end tenancy agreements and raise prices. This was in 2012 and in the first five years of this law only in Lisbon 3.000 people were evicted. In the same year the state created a public institution to facilitate these evictions and the number of evicted people went up considerably. 

The government has also created laws and given incentives to open the market in real estate global capital. Tourism was a new solution against the recession leading to the success of digital platforms like Airbnb. All together created a big global demand in the local housing market with a lot of people and capital arriving in Lisbon. The aim of the government was to put Lisbon in the global map of investors and the Portuguese capital Lisbon is now on the map of global cities for investment. Consequently, as more people are coming to rent and stay in Lisbon for days or a couple of months or even buy flats in Lisbon, prices and rents have increased in a crazy way. There are neighborhoods where prices have increased 250% in a 5-year period between 2015-2020. 


What is the situation now in Portugal and especially in the big urban centers like capital Lisbon compared to five years ago with regards to the housing crisis?

Prices started to rise in 2014. Economy started to grow but price hikes in Lisbon are crazy. Lisbon is the capital where prices have grown the most in the last decade in Europe. There is a big disconnection between housing prices and salaries. In the 2011 census the overall price for 1-bed apartments in Lisbon in the rental market was 250 per month and the minimum wage was 500 per month. Now the minimum wage is 750, and the rent is 1200. The effort rate, another indicator, which refers to the ratio between salaries and housing prices in Lisbon is the biggest in Europe. Only during COVID-19 a recession in prices was registered, but after the pandemic prices have then been increasing again about 10-15% per year. 


What are the major effects of Airbnb’s expansion in the local housing market? Is there any state-led regulation of the market?  

It is very regulated, but the regulation supports the short-term rental market. In 2014 the government regulated Airbnb in a completely liberal way, and it was afterwards very easy to enter the market as you only needed to send a form and you then secured short-term rental title. In five minutes, you can operate without paying any tax. 

In 2020 there were 20.000 licenses issued in central Lisbon. In cities like Barcelona, Amsterdam, Berlin, local authorities tried to control the growth – e.g. Barcelona in 2014 stopped issuing licenses for Airbnb. Lisbon is a completely open and free market, and this adds more on the appeal of the real estate market locally. Property owners and developers could buy license to build, and this license was very valuable on top of the value of an apartment. Therefore, there was an inflation effect just for the fact that you own a certain rental license. 

Another effect is that with this policy 20.000 properties were removed from the rental market so rental prices rose again. The limited supply for rentals in central Lisbon has caused a major imbalance as for every ten properties to rent there are thousands available at Airbnb. 

During the COVID-19 pandemic tourism was forced to cease operations and landlords moved back to the traditional rental market. Around 3.000 rental properties moved back to the rental market out of 20.000. Rental prices decreased by 8% in a period of six months demonstrating the strong relation between prices and Airbnb supply. 


Last year, Portugal’s government approved plans to invest €2.4 bn in public housing by the end of 2026. Who is going to pay the cost and who will benefit from that?   

This plan is connected to the eternal promise to build new homes by the government. Two important things we need to keep in mind about this proposal: first, the construction is a promise that has never happened whether this is public housing or housing construction with cooperation between public and private sector. When a government says “I will build a house in the next 5 years” this never happens as the process is very slow. Public housing is good, but it is not a short-term solution. 300 apartments per year is not a solution. If you put 10.000 apartments on the market in one day, yes, this is a solution. 

Another thing is that we do not need new homes. We need to change the use of homes. Apart from the short-term rental, we have 48.000 empty homes in the municipality of Lisbon. Many of them are abandoned or degraded buildings, so you need to renovate and rehabilitate them, but there are also other flats that have been rehabilitated and remain empty. People just bought them to have a financial asset. So, when you have 48.000 empty homes and 20.000 short-term rentals you do not need to build new ones. Even if you build new homes, you need to think about the environmental impact of this action because the construction sector is one the most polluting sectors and the cement industry is responsible for 8% of global emissions. Accelerating the construction process of new housing units means accelerating emissions, especially when there are environmental rules you need to abide by and the European Commission has committed to reach zero emissions until 2050. 


*Agustín Cocola-Gant is a researcher and scientific collaborator at the Institute of Geography and Urban Planning of the University of Lisbon.

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