The Council of Ministers approved a series of housing measures this Thursday, including tax reductions for landlords and the introduction of the concept of 'moderate rent'.
Opposition parties argue that these measures still fall short of what is needed to address the country’s severe housing crisis, as growing numbers of people struggle to find viable housing options. However, the Government has approved new measures for landlords and tenants in the Council of Ministers, aiming to stimulate the rental market primarily through tax incentives.
1. Increased tax deductions for tenants
In 2026, the maximum IRS (personal income tax) deduction for rental expenses on housing at moderate prices (i.e., up to €2,300 per month, according to Infrastructure Minister Miguel Pinto Luz) will rise to €900, and in 2027 to €1,000. The concept of 'affordable housing' is being phased out.
2. Reduced taxation for landlords
The IRS tax rate on rental income from housing leased at moderate rents—up to €2,300—will be reduced from 25% to 10%. The minister clarified that the measure considers a household income of €5,000. Thus, on a €2,300 rent, landlords will now receive €2,030 net, compared to the previous €1,725.
3. Exemption from the IMI surcharge
Similarly, the new tax regime, valid until 2029, ensures that the IMI (municipal property tax) surcharge will not apply to properties rented out at up to €2,300 per month.
4. Reduced VAT on construction and rentals
Under the new measure approved by the Government, newly built homes with a sale price of around €648,000 will be subject to a VAT rate of just 6%. The same rate will apply to rents up to €2,300. The Government states that the main objective is to address housing pressure in high-demand areas such as Lisbon and Porto. Montenegro said, 'This value embodies the concept of access to housing at affordable prices.'
5. Streamlined licensing with less prior oversight
The licensing process will now involve 'less prior control to encourage investment decisions,' the Government said, adding that it will continue simplifying both licensing and execution procedures for housing projects.
6. Strengthened public guarantee for young people buying homes
An additional €350 million has been allocated to the public guarantee scheme for home purchases by individuals up to age 35, raising the total available amount to €1.55 billion, according to a decree signed this Thursday, September 25, by Joaquim Miranda Sarmento. The public guarantee for housing loans to those aged 35 or younger applies to contracts signed by the end of 2026 and allows the State to act as guarantor for up to 15% of the transaction value. In practice, combined with standard mortgage rules, this enables young buyers to obtain a loan covering 100% of the property’s appraised value, instead of the usual 90% limit. Eligible beneficiaries must be between 18 and 35 years old (inclusive) and purchasing their first permanent home, priced at no more than €450,000.
7. Abolition of the 2% cap on rent increases for new contracts and easier evictions for non-payment
Among additional reforms to boost housing supply—which the Government promises to present in the coming months, as stated in the Council of Ministers’ communiqué—are other measures, some controversial. These include relaxing rental laws by eliminating the 2% cap on rent increases for new leases—a rule that previously applied to properties already on the market in the preceding five years. Rent adjustments for existing contracts will continue to be indexed to inflation. The Government has also signaled its intention to simplify evictions in cases of rent non-payment, aiming to provide landlords with greater security by enabling swift removal of tenants in arrears.