Shortage of houses in Lisbon or not? In the last quarter of 2022, there were 20,700 homes for sale in the Lisbon region. The lowest figure in the last 15 years, and a drop of about a third compared to just two years ago. This means that not all empty houses are for sale or to rent.
So said the Residential Information System (SIR), a platform of the Confidencial Imobiliário magazine that has data reported by hundreds of companies and real estate agents.
Fewer houses on the market does not mean a shortage of houses. There are few houses for sale, but that doesn’t mean that there are few empty houses in Lisbon. Of the 320 thousand dwellings in the city, about 15% are empty. In other words, there are 47 thousand empty houses in Lisbon – between those that are for sale and rent, and those that are unoccupied.
In the same direction points the National Statistics Institute (INE): in the third quarter of 2022 prices reflecting the shortage in supply, rising more than 10% when compared with the same period last year and with a value per square meter almost three times higher than the national median.
In other words, although there is a shortage of homes to trade, they actually exist. “There is no shortage of houses built,” says Luís Mendes, a specialist in urban studies, researcher at the Center for Geographical Studies (CEG) at the University of Lisbon and member of the (H)abitation Network
Nationwide, there is even a housing “surplus” that may be close to 1.8 million dwellings. Although the data is not totally secure. And they include secondary houses.
According to data from the 2021 Census, there were in Portugal about 5.97 million classic family dwellings for about 4.15 million classic families (the definition comprises sets of persons living in the same dwelling and having relations of kinship between them, and may occupy all or part of the dwelling, as well as “any independent person occupying part or all of a housing unit”).
If an important part of the number of dwellings concerns secondary or seasonal residences (about 1.1 million), then we can still consider more than 723 thousand residences as vacant (12.1%).
In Lisbon, the scenario is identical. In 2021, INE counted about 243 thousand families for about 320 thousand classic family houses. Of these, about 48 thousand dwellings were vacant (14.9%) – 21,479 dwellings were listed for sale or rent. But 25,999 were listed as unoccupied.
Although there is no shortage of homes, the incompatibility between purchase and rental prices and available income is now an obstacle for most people looking for housing in the city.
In other words, as Gonçalo Antunes, researcher at the Centro Interdisciplinar de Ciências Sociais da Universidade Nova de Lisboa (CICS.NOVA – NOVA FCSH) says, “one of the problems of our housing market seems to be that, although there are more houses than families, the houses that are on the market at any given time, for sale or rent, are few in number or insufficient”.
It is this “scarcity” that leads to rising values per square meter.
In recent times, there has been talk about the lack of houses on the market and the need to build more. But are empty houses a solution to the housing crisis? Experts point to two paths:
The need to increase the supply, but of public housing, through a merger between new construction and rehabilitation.
And to put the vacant houses on the market.
But how to do it?
Encouraging public construction of affordable housing
With the rental market values that keep rising, the bet on the reinforcement of the public housing stock is one of the most pointed ways to get around the inefficiencies of the free market and to guarantee what is a right consecrated in the Constitution in its 65th article – the right to housing.
For Gonçalo Antunes, the need to invest in construction is evident.
“There is a lack of new construction. Public construction, in particular,” he says, stressing that Portugal has only about 2% public housing, a fact that makes it “urgent” to reinforce the presence of the public administration in the housing sector.
“The answers that are possible with 20% or with 2% public housing are very different. This in a housing market like the Portuguese and in the current inflationary climate, characterized by rising material prices and volatility in their variation.
This is also why Luís Mendes considers “obvious” the need to “build in response to the housing crisis”. But the bet must be on public housing. However, he questions the moment: “The question is whether, in conjunctural terms, we are in conditions to build. On the side of the real estate sector, it’s not profitable right now, keeping the profit margins they had. And there is no incentive for new construction to be affordable. That’s why all the batteries in the real estate sector are oriented to the luxury or upper middle class sector.
The researcher recalls that today there are major obstacles to the construction of new housing supply. An example of this is the lack of qualified labor and the escalating prices of materials, sometimes “driven by speculative interests.
Putting empty houses on the market at affordable prices
Considering the present housing potential, Gonçalo Antunes considers it “fundamental” to mobilize the vacant patrimony. The researcher believes that putting vacant houses on the market “could be important to increase the existing supply”.
How to do it?
Gonçalo Antunes is “very skeptical about measures that confront ownership, such as expropriation, requisition, or the duty to rent”.
As a way to promote the entry of vacant buildings in the housing market, their “natural place”, it proposes the creation of “financial incentives for the rehabilitation of buildings, tax benefits or exemptions [and a] considerable reduction of the tax burden on rentals”.
Recall that currently, the Lisbon City Council (CML) guarantees, among other incentives, the exemption from payment of IMT and IMI on properties that undertake rehabilitation works in buildings with the purpose of renting for permanent housing or the owner’s permanent residence.
If an important part of the number of dwellings are secondary or seasonal residences (about 1.1 million), then we can still consider more than 723 thousand houses as vacant (12.1%).
But Luís Mendes argues that fiscal policies to promote rehabilitation are not enough. In other words, for him, fiscal measures would have to be complementary to more muscular measures.
There are already several tools available to the central and local administrations, from the right of preference to forced leasing and single contract works, to put the city’s vacant housing units on the market. The option for expropriation would be the “last level” to be promoted – a last resort solution.
“These are measures that exist in our legal system and that allow city councils and the State itself to streamline part of the vacant property and put it at the service of the population.”
Articulating these measures in order to put them “at the service of the right to housing” is an imperative. But, Luís Mendes does not hide the fact that this is a “complex” political action since it “forces the public domain over the private domain.
“We cannot forget that the right to property is also a constitutional right”, he concludes.
Recently, Mariana Mortágua, of the “Bloco de Esquerda” party, proposed that landlords with empty houses be forced to rent them, causing a great deal of controversy.
The right to Housing and Property can “be seen as programmatic rights”, which means that the State can make use of either right, according to Luís Mendes, “it can invest its political action in the sense of conditioning each one of these rights, meeting the needs of the citizens. This is a complex and significant issue – a constant duality between the right to housing and the right to property that has to be overcome.
Two of the tools available to CML, explained by Luís Mendes:
“It allows the State, in a situation where a vacant lot has existed for many years in an area of strong urban or housing pressure, of great demand that is not being met, to intervene in order to take possession of the ruin or vacant lot and put it at the service of this need for housing demand.
In the case of a vacant lot with no social or economic function, it should be called upon to fulfill a function that is of social and civic interest.
In this case, the State uses its force. It takes possession, rehabilitates, uses, and then returns this property to the owner, in the same or better condition than he found it. It’s not an expropriation, which is understood in a frankly negative way and which may even, in certain cases, if not well guarded, be unconstitutional.”
Right of preference
“It has been used a lot by councils, at the level of local housing strategies. The councils can exercise the right of preference, have privilege in the real estate business, especially if it is in an area of strong urban pressure. Whether it’s for renting or buying.
It acquires the property, generally for its asset value and not for market value, and can also exercise some kind of compensation with the seller, some kind of counterpart. If the right of first refusal is done at market value, it may be stimulating speculation. It’s very important that it be done below market value.”
Creating public housing without betting everything on construction
Since the late 1990s there has been a new international trend. “There has been a lot of talk about rehabilitation. The problem is that the construction sector hasn’t adapted to this paradigm shift,” points out Luís Mendes. The values per square meter “are very high”, he says.
The focus should now be not only on the new construction of affordable housing, but also on the rehabilitation of vacant properties with a residential vocation. And it is possible to produce public and private affordable housing, guarantees the researcher.
Under the Recovery and Resilience Plan (PRR), Portugal now has 2.7 billion euros to invest in housing until 2026. A substantial amount, especially when compared with the total amount invested by the Portuguese State over a 24-year period, from 1987 to 2011 – 9.6 billion euros, 73.3% of which was applied in housing credit interest rate subsidies.
With execution periods up to 2026, only three years away, the values foreseen for the production of public housing no longer coincide with the reality of inflated and volatile prices of construction materials.
Now, it is the execution of the PRR itself that is being called into question, warns Luís Mendes. “The execution rate we’re going to have in 2026, three years from now, is going to be very low.”
The municipalities that are betting on new construction are finding that tenders are left empty, with no contractors or construction companies refusing to execute the specifications, precisely because of the costs. “Sometimes budgets are done in less than 24 hours, with the possibility of being rectified, such is the inflationary escalation in prices and construction costs.”
While construction may be a necessary way to significantly increase the public stock, building new “implies a [long] period, usually six years, from licensing to turnkey.
To have an effect on the market in the short term, tools for mobilizing the vacant (some of them were listed earlier in this text), such as the use of the right of preference, “picking up houses from the bank”, may prove more fruitful.
“Fortunately”, says Luís Mendes, there are several municipalities that are starting to use these strategies as a way to act faster in the market and to “fill gaps in new construction”.
There are alternatives, which municipalities are exploring in their Local Housing Strategies to cope with the costs. Through tax incentives and the granting of surface rights on public land, the State and the municipalities can “encourage” builders and property developers to invest in the construction of affordable housing – with values that do not exceed “30% of the effort rate”.
Similar to a measure recently tried in Lisbon, in the Affordable Rent Program, Lisbon can bet on the promotion of private housing at controlled costs, giving the surface rights to builders who then guarantee “a portion of 20% to 25%” of affordable housing.
According to the Lisbon Local Housing Strategy, 8164 situations of housing need have been identified in the city. The PRR proposes to solve these shortages in their entirety and to promote a public housing stock that is affordable and exclusively for rent.
A European problem
According to a report by the Investigate Europe consortium of journalists, of which Portuguese journalist Paulo Pena is a member, “one in every six properties in Europe is empty – the equivalent of about 38 million empty homes. In Greece, Portugal and Bulgaria, Feantsa – the European Federation of National Organisations working with the Homeless – estimated that one in every four properties was empty.
More recently, “data compiled by the OECD in 2021 for selected countries show that the problem persists. Hungary, Cyprus, Finland and Ireland were revealed as having the highest proportion of vacant housing in Europe.”
In central London, according to data from the Department of Levelling Up, Housing, and Communities, one in 46 homes are empty – while more than 250,000 Londoners are waiting for a state home. These homes include partially used ones.
In Paris, according to the digital newspaper The Local, a report by the Urbanism Agency (APUR) a quarter of the houses in the center are empty – more than 20,000. In the rest of the city the figure is around 15%.
But in Germany the problem is only found in the less urban areas. According to a recent report, in Munich the vacancy rate is only 0.2%. In Frankfurt, Freiburg, Münster and Darmstadt the situation is similar.
In Spain, 5% of homeowners in Valencia have empty homes, followed by 4.2% in Andalusia and 2.8% in Catalonia – according to the Spanish Business Insider. Madrid has the lowest ratio (2.4%).
These figures are sometimes difficult to compare, because not all the bases are identical.
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