Affordable Housing is not advantageous

The residual percentage of public housing stock , of a social nature, predominantly intended for the most disadvantaged populations and, therefore, with stigmatizing implications, has been exhaustively referenced as one of the structural factors for the creation of a regulatory vacuum in our housing system, therefore incapable of counterbalancing the exaggerated prices charged by the market, especially in areas of strong urban pressure. The public policies implemented to overcome this problem have had very visible practical difficulties. As of September 30, 2024, under the 1º Direito Program, only 1,700 homes had been completed, less than 3% of the total target set for 2030, around 59,000 homes. The implementation of the project financed by the Recovery and Resilience Plan has been vehemently contested due to the bureaucratic procedures of the entire process, which insist on driving away construction companies, in addition to the apparent absence of the IHRU to provide timely responses (Gonçalves [idealista], 2025).

Much is pointed to the example of the high volume of the Dutch social housing stock, the result of a completely different trajectory from the Portuguese case, based, since the beginning of the 20th century, on a strong associative component, and with a clear focus on the social rental market. Even so, it is important to highlight the convergence trajectory between the two contexts. After 2011, this associative culture was progressively dismantled – affordable rentals began to be barred to the bulk of the Dutch middle class, pushed towards the solutions available in private rentals, which are poorly developed, poorly regulated, and quite detrimental to their wallets. More recently, the Dutch State has been recognizing this market failure, expanding the eligibility criteria for houses (based on the rent charged) covered by the affordable rental system (Hochstenbach, 2023, p. 519).

Mentioning the ambition to quickly follow in the footsteps of the Dutch example is counterproductive, especially since we are not “descended” from their model in any way. Given the limited resources we have and the culture of the sector itself, we must create solutions that encourage the market to act as a social promoter, fostering the viability of affordable housing construction, which, in all honesty, is quite poorly managed.

The first significant revision of the Legal Framework for Land Management Instruments (RJIGT), the ill-fated Land Law (Decree-Law No. 117/2024 – Decree-Law No. 80/2015) was seen as a mechanism to produce deflationary effects on the housing market, through the construction of housing at controlled costs. Even before it was published, some sector leaders were already demanding additional measures, namely, 6% VAT and the incorporation of these rural lands converted into urban lands in an Urban Rehabilitation Area, or another special plan that would allow access to this tax relief, because, as warned by the president of AICCIPN, Manuel Reis Campos (Sousa & Ferreira [idealista], 2024), only in this way would it be possible to build and sell at lower prices. This initiative to convert rural land has an obvious limitation – the possibility that its costs will naturally suffer an inflationary spiral, as a result of its renewed attractiveness (Sousa & Ferreira [idealista], 2024).

The preamble to Decree-Law No. 117/2024 states that this “special reclassification regime also ensures that at least 700/1000 of the total above-ground construction area is intended for public housing or moderate-value housing” , not to be confused with “other concepts such as “controlled costs”, as it seeks to cover access by the middle class, considering median values ​​of the local and national markets, and defining maximum values ​​to ensure greater equity” . The RJIGT has already undergone a new review, carried out by Law No. 53-A/2025, which establishes the categorisation of “public housing”, “affordable rental” and “controlled-cost housing”, the latter two concepts used to the detriment of “moderate-value housing”. This new reality, as noted by the current Secretary of State for Housing, Patrícia Gonçalves Costa, limits the effectiveness of the diploma. Other industry figures, such as the president of the Portuguese Association of Real Estate Developers and Investors, have already expressed their displeasure with this setback (Sousa [idealista], 2025).

The erratic path of these pieces of legislation could make the model of construction of housing at controlled costs unviable (Sousa [idealista], 2025). Executive Order No. 69-B/2024, which makes the second amendment to Executive Order No. 65/2019, determines that a housing development at controlled costs corresponds to at least 70% of its total gross area. The Government believes, however, that it is possible to make this “business” structure viable, allocating the remaining 30% of “related uses” to services or commerce (Sousa [idealista], 2025).

Nevertheless, I would like to reiterate the obvious but completely overlooked constraints associated with the fact that the prices of converted rural land are not subject to any restrictions, thus fostering the same inflationary effects that are normally seen. Furthermore, as the president of APPII points out, although Controlled Cost Housing already benefits from a minimum VAT rate of 6%, intricate bureaucratic processes are still in place that make access to this benefit impossible, thus discouraging investment in this option with reduced profit margins (Sousa [idealista], 2025).

The contradictory circumstances described, which are typical of our separate legislative production, particularly at the construction level, could certainly weaken the only means we have to quickly promote quality housing that is affordable for the Portuguese middle class.