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New rental contract limit approved: Say goodbye to excessive rent hikes!

Updated: Aug 4, 2023

Parliament takes action to curb rental price increases in Mais Habitação program: New measure prevents landlords from raising prices for existing rental properties.

House for rent in Lisbon

Restrictions set for specific rental contracts: Rent for new contracts cannot exceed the previous rental value for houses on the market in the last five years.

Consideration is given to inflation: New rental contracts may have a maximum increase of 2%, aligning with inflation. Additionally, rental contracts not updated in the past five years may incorporate automatic update coefficients, such as the 5.43% value observed in 2023.

A “necessary” move for Portugal

António Costa, earlier this year, acknowledged that the rental limit is a restrictive measure but deemed it "reasonable" and "necessary" to prevent an unaffordable rental market in Portugal. The measure aims to address the existing disparity between rental prices and household incomes, ensuring that residents can afford housing.

The approved measure, which restricts rental contract increases, solely applies to properties with rental history in the past five years. However, there are currently no limits in place for newly entering properties into the residential rental market. The measure received approval on July 6, with the Socialist Party (PS) voting in favor, the Left Bloc (BE) and the Portuguese Communist Party (PCP) abstaining, and the Social Democratic Party (PSD), Chega (CH), and the Liberal Initiative (IL) voting against it.

In cases where a rental property undergoes certified deep refurbishment or restoration works approved by the City Council, the rental contract value may be increased by up to 15% annually. This adjustment allows landlords to recoup the expenses incurred during the necessary restoration or refurbishment while aligning the lease with the property's market rental value.

A range of measures was approved on Thursday as part of the Mais Habitação program. In addition to the limit on new rental contracts, other policies that received approval included the suspension of new local accommodations outside the country's interior, the cessation of new golden visas through housing investment, and the exemption of capital gains on houses sold to the state. These measures collectively aim to address various aspects of the housing market and promote a more balanced and accessible housing system.

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