Bill no. PL 64/XXIII/2023, of March 3, 2023, also known as the "More Housing" bill, established a set of measures impacting, among other things, current rental lease and local housing regimes.

More Housing" program: Proposals for local rental and housing

As part of the "More Housing" bill, the Portuguese government has unveiled a draft law ("PPL") that includes concrete measures aimed, among other things, at modifying the regimes of the local housing (AL) and rental leases.

Local housing

The main proposed amendments impacting the local accommodation regime are as follows 

• suspension of issuance of new registrations for AL establishments, except in rural accommodation zones;
• suspension of new long-term rental housing registrations until December 31, 2030
• AL registrations issued on the date the new law comes into force will expire on December 31, 2030;

In cases where the rental activity is carried out in an autonomous fraction of a building or part of an urban building capable of independent use, the general meeting of co-owners, by resolution of more than half of the building's perimeter, may oppose the exercise of the local accommodation activity in this fraction. 

granting control powers to the ASAE (Portuguese tax police), the municipality and the parish council with territorial jurisdiction

with regard to the duration of the establishment's registration ALThe registration is valid for a period of 5 years, starting from the date of the preliminary communication with the time limit stipulated in the previous article. Renewal of the registration requires the express authorization of the municipal council with territorial jurisdiction.

A tax incentive is also proposed, consisting of an exemption from the IRS or personal income tax, applicable to owners who transfer their property from local accommodation to rental housing.

Rental 

With regard to the rental lease regime, the proposed measures are essentially aimed at controlling affordable rents. With regard to pre-1990 rental contracts, if the tenant invokes and proves that his or her adjusted annual gross household income is less than five RMNA (retribuição mínima nacional anual), or proves that he or she is aged 65 or over, or disabled with a proven degree of disability equal to or greater than 60 %, or has resided for more than five years in the rented premises, or his or her spouse, unmarried partner or a relative in the first degree of the direct line.

The rent will be updated in line with changes in the economic situation. The rent will be updated in line with the annual rent discount coefficient for the various types of lease, which is the result of the total variation in the consumer price index, excluding housing, corresponding to the last 12 months, as determined by the French National Statistics Institute.

In the case of new residential leases on property covered by previous leases signed within the last five years, the following criteria will be used to establish the value of the rents

The initial rent cannot exceed the value of the last rent applied to the same property in a previous contract, increased by a coefficient of 1.02 ;

the annual coefficients provided for by law no. 6/2006 of February 27 may be applied, provided that no more than three years have elapsed since the date on which their application would initially have been possible.

In the case of buildings undergoing major conversion or restoration work, duly certified by the local council, the value of the corresponding expenditure borne by the owner may be added to the initial rent of new rental contracts, up to an annual limit of 15 %.

It is also proposed that the rent discount coefficient to be considered for 2023 be 1.0543. 

Vacant dwellings

The PPL provides for the inclusion in the Portuguese legal system of a forced rental mechanism for vacant dwellings. To this end, urban buildings or autonomous fractions that are unoccupied for one year are considered vacant. In this context, the signs of vacancy are the absence of supply contracts in these properties, as well as the absence of billing in cases where the existence of such supply contracts is verified.

It is also important to note that the PPL establishes a negative delimitation of the concept, according to which properties in the following conditions will not be considered vacant

• they are intended as second homes, emigrant residences or residences for people displaced for professional, training or health reasons;
• during the period of execution of the work duly authorized or communicated, during the deadlines assigned to them or during the duration of legal actions that prevent such use;
• whose construction was completed or use permit issued less than a year ago;
• are acquired for resale by natural or legal persons;
• are part of a tourist resort or are registered as a local accommodation establishment;
• constitute the residence on national territory of a Portuguese emigrant, being considered as such their tax residence, in the absence of any other indication; or
• are the residence, on national territory, of a Portuguese citizen who performs public functions or commissions abroad in the service of the Portuguese State, international organizations or functions of recognized public interest, as well as their respective authorized companions.

It should be noted that the procedure for a property to be considered vacant is not automatic. Municipalities, armed with the information that certain properties qualify as vacant, will notify the owner, at his or her tax address, of a rental proposal.

Once the property owner has been notified, he or she has at least 10 days to exercise his or her right to a prior hearing, and a maximum of 10 days to decide on the rental proposal.

Thus, if the property can be considered vacant, a mechanism is proposed that contains two rental relationships: (i) the rental relationship established between the owner of the vacant property and the municipalities; and (ii) the rental relationship established between the municipalities and the citizen benefiting from the measure.

Finally, it should be noted that municipalities may carry out compulsory recovery work on properties covered by the "More Housing" program, and that the work will be reimbursed through the collection of rents due.

Conclusion 

The plan presented by the government sets out a series of measures that will entail major changes to the legal regimes governing local housing and residential leases.

Given that the measures proposed under the "More housing" program are currently the subject of public consultation, the final text of the PPL could yet undergo significant changes.