Portugal’s housing crisis: Bridging the gap with actionable solutions

Paulo Lopes

Lisbon: This substantial gap is creating widespread issues of affordability and accessibility, underscoring the urgent need for action.

The government’s proposed investment of €4.2 billion by 2025 marks a significant step forward. Aimed at constructing and rehabilitating 59,000 housing units, this initiative represents the largest housing investment in decades. However, experts agree that while this is an essential measure, it alone is insufficient to close the gap. The solution lies in a holistic approach that mobilizes both public and private sectors to rapidly expand housing supply.

One of the key challenges is incentivizing private sector involvement. High taxes, including VAT and property transfer taxes, make affordable housing projects financially unappealing to developers. Reducing VAT to a more feasible 6% is a proposed measure that could attract private investment by lowering development costs. This adjustment would provide the private sector with the financial breathing room needed to commit to affordable housing projects on a meaningful scale.

Additionally, Portugal must address the excessive bureaucracy that hampers progress. Lengthy processes for planning, licensing, and approvals delay the start of housing projects, pushing timelines far beyond what is manageable in a crisis. Simplifying these procedures would remove a significant obstacle, allowing projects to move forward more efficiently and at a lower cost.

The issue of labor shortages also looms large. The construction sector is currently facing a deficit of around 80,000 skilled workers, a shortfall that threatens to derail the progress needed to meet housing targets. To address this, targeted vocational training programs and incentives to attract workers into the sector must become a priority. By rebuilding this workforce, Portugal can ensure that projects are completed on time and within budget.

Financing is another critical area that requires attention. Stricter lending criteria have made it increasingly difficult for developers to secure the funding needed to launch new projects. Expanding access to financing through public-private partnerships or specialized loan programs could provide a viable solution, enabling more projects to take off.

Finally, better use of existing resources is vital. Portugal holds approximately 30,000 public properties, many of which remain underutilized. Auditing and converting these properties into housing could provide a quick and efficient way to address immediate housing needs while reducing waste and revitalizing urban areas.

Addressing the housing crisis in Portugal will require a collaborative effort and decisive action. By combining public investment with private sector engagement, cutting through bureaucracy, addressing workforce shortages, and optimizing existing assets, Portugal can move closer to creating a future where housing is accessible, affordable, and sustainable for all.