Portugal has introduced a new set of housing reforms aimed at addressing the country’s growing affordability challenges, as demand continues to outpace supply in key urban areas. The measures, approved on March 27 under the government led Luís Montenegro, focus on increasing the availability of homes, encouraging investment in the property sector and improving access to long term housing. Officials say the reforms are designed to stabilize prices over time while supporting both buyers and renters in a market that has experienced sustained pressure.
The government’s strategy is built around targeted tax incentives intended to stimulate housing development and rental supply. Among the key measures is a reduction in taxes for landlords who offer properties at moderate rent levels, alongside a lower VAT rate applied to construction and renovation projects linked to residential use. These changes are expected to make it more financially viable to invest in affordable housing, particularly as construction costs and financing conditions remain a concern across the European property market.
Another central element of the reforms is a capital gains tax exemption for property owners who reinvest proceeds from sales into affordable rental housing. This policy aims to redirect capital toward increasing supply in segments where demand is strongest. Authorities believe this approach could help rebalance the market encouraging long term investment rather than short term speculation. Over time, this is expected to ease price pressures and improve access to housing in both major cities and surrounding regions.
To accelerate development, the government is also introducing changes to urban planning and construction approval processes. A new fast track system is designed to simplify building permits, reduce administrative delays and create a more predictable framework for developers. lowering bureaucratic barriers, officials expect projects to move forward more quickly, helping bring new housing units to market at a faster pace. This structural shift is intended to support sustained growth in supply while maintaining regulatory oversight.
The reforms also address long standing issues related to undivided inheritances, which have kept a significant number of properties off the market. Under the new rules, if an inheritance remains unresolved for two years, any heir will be able to initiate the sale of the property even without full agreement from all parties. This measure is expected to unlock idle housing stock across both urban and rural areas, adding to available supply while ensuring that legal protections for heirs remain in place during the process.
