The rents established in new housing lease contracts will be subject to a maximum ceiling, which will be defined according to the inflation of previous years, as well as the medium-term inflation objective of the European Central Bank (ECB). The limits will, however, only apply to homes that were already on the market within the last five years; for those who are only now entering the rental market, there will be no limit to the rents charged.
The measure was announced this Thursday by the Prime Minister, António Costa, as part of the most recent legislative package aimed at the housing market. “We have seen for several years that the setting of rents in new contracts is absolutely free and that rents, especially in the last ten years, have suffered increases much higher than inflation. Therefore, the current prices of rents in new contracts are very high for the Portuguese market”, began by saying the Prime Minister, in a press conference.
Thus, the Government considers, while maintaining “respect for the market”, it will be “necessary to regulate the growth of rents in the market”. To this end, limits will be set on rents charged in new lease contracts. “For new contracts, which succeed contracts signed in the previous five years, the new rent must result from the sum of the last rent practiced with the automatic annual updates that, during the period of the previous contract, could have been made. value of the ECB’s medium-term objective for raising inflation, of 2%”, detailed António Costa.
As an example: a house is rented, currently, for 500 euros. The contract, which ran for the last five years, is now coming to an end. If the landlord wants to sign a new contract, the new rent will have to be limited to the following calculation: 500 euros, to which is added the quotient of automatic updating of rents in the last five years (1.15% in 2019; 0.51% in 2020; nil in 2021; 0.43% in 2022; and 5.43% in 2023, since it will be considered the value that would have been applied if the Government had not imposed a brake this year) and another 2% (which result from the ECB’s medium-term objective.
This rule will only apply to contracts that succeed others already signed in the last five years and that are now coming to an end. For homes that are just now coming on the market, with no benchmarks in the last five years, there won’t be any limits. “This measure is only for new contracts that succeed contracts that have been signed in the last five years. We are all aware that these are certainly with incomes above the normal income of Portuguese families. The limitation that we impose is the one that has into account this reality”, justified the prime minister. “It is a limiting measure, but one that we consider reasonable and necessary taking into account the circumstances in which the market is already”, he stressed.
In any case, defends António Costa, the remaining measures presented this afternoon, which include the sub-leasing by the State of houses owned by private individuals or changes that will allow land and properties licensed for commerce or services to be used for housing, should be enough to increase the housing supply and thus lower prices.
“What is expected is that the supply of homes can increase significantly and, thus, moderate the anomalous increase that has occurred in recent years”, he concluded.