João Fitas, managing associate in the corporate, real estate and tourism practice, has authored an opinion article published by idealista on the two new legal instruments approved by the Portuguese Government to increase the supply of affordable rental housing in Portugal: the Investment Contract for Rental Housing (CIA) and the Simplified Affordable Rental Scheme (RSAA).
Why is there a shortage of affordable rental housing in Portugal?
According to João Fitas, the Portuguese market has long suffered from structural weaknesses: the absence of a build-to-rent market comparable to those in the United Kingdom or Germany, an unattractive tax framework for residential rental projects, and a growing gap between average incomes and rents in Lisbon, Porto and other cities.
What is the Investment Contract for Rental Housing (CIA) and how does it work?
The CIA is a contract entered into between an institutional investor and IHRU, I.P., acting on behalf of the State, with a duration of up to 25 years. In exchange for a commitment to make housing available at moderate rents, the investor benefits from exemptions on property transfer tax (IMT) and stamp duty on acquisition, a reduced VAT rate of 6% during construction, and exemptions from municipal property tax (IMI) and the additional municipal property tax (AIMI) for specified periods. The scheme also includes an economic and financial rebalancing clause that protects the project's profitability against future legislative changes — a mechanism without precedent in the private rental sector in Portugal.
What is the Simplified Affordable Rental Scheme (RSAA) and who is it aimed at?
The RSAA is aimed at private landlords and small property companies. It offers an exemption from personal income tax (IRS) or corporate income tax (IRC) on rental income, provided the rent does not exceed 80% of the INE median for the relevant municipality and property type. Compared to the previous scheme, it eliminates the administrative burden associated with tenant applications, removes compulsory insurance requirements, and reduces the minimum contract term from five to three years.
Will these measures be enough to resolve Portugal's rental crisis?
João Fitas concludes that the effectiveness of both schemes will depend on the speed of implementation through ministerial order, the genuine uptake by investors, and coordinated action between the State, local authorities and IHRU, I.P.. The real test will be whether legal incentives can be translated into more homes on the market at rents that households can actually afford.
Read the full article on idealista.
