Lisbon officials recently announced a program to help increase the amount of affordable housing in the city center — paying landlords to convert their Airbnb properties into long-term rentals aimed at locals.
Tourism has pushed housing prices in Lisbon higher and higher, often growing out of reach for many local residents. Between 2018 and 2019 alone, housing prices in Lisbon grew by 9.5%. A high number of short term rentals has also made it difficult for locals to afford housing in Lisbon’s urban center — around 25,000 rentals, or 8% of the city’s total rentals, are short term rentals.
This price increase makes affordable housing difficult to come by, as 25% of Portuguese residents make minimum wage, or about $715 per month (635 euros). City officials needed to push for cheaper housing in the city center.
Covid-19 has decimated rental income for Airbnb operators across the globe as tourism has slowed down due to local restrictions and lockdowns. Portuguese Airbnb operators did not want to convert their properties to long-term rentals because of a difference in tax treatment — but officials are hoping that this new program could change their minds.
What is Lisbon’s New Program?
The plan is called “Renda Segura” (translated to mean “secure income”) which hopes to create a better housing market for local residents. Leases will be capped at 30% of a resident’s income, and the city will subsidize the rest until the landlord receives a market rate. This rent will also be exempt from income tax.
Mayor Fernando Medina said that the program is focused on bringing essential workers into the city center, as many have been forced to move away from the city due to rising rents.
The city aims to register 1,000 rentals for the program this year. They’ve collected 177 applications so far. The program could help increase the number of affordable renters on the market, but time will tell how owners will receive the program.
Not charging income tax on rent is a start, but owners were worried about how a difference in property valuation would impact their property tax. Rental owners might also be disincentivized if the amount of rent they would collect at the market rate is much lower than what they’d make through Airbnb.