What is Changing Regarding Portugal’s Short-Term Rentals?

What is the Mais Habitação Bill

The Mais Habitação Bill was a series of measures that were passed in October 2023 to address some of the pressing housing issues in Portugal. As part of this, there was a suspension on new Alojamento Local (AL) licenses being issued. This is a license required for properties to operate as short-term establishments.

The aim of these new measures was aimed at limiting the abundance of short-term rentals in densely populated urban areas where the Portuguese government viewed short-term rentals and the increasing pressure from tourists to be problematic for Portuguese residents and a contributing factor to rising housing prices.

With this said, the new legislation failed to recognize the substantial role that short term rentals have had in the rehabilitation of many urban areas.

What were the key implications of the Mais Habitação Bill on short-term rentals?

Portugal short term rental changes under the Mais Habitaçao Bill were considerable, with the main restrictions and changes outlined below.

No new licenses issued in key areas

Under the Bill, there was a suspension of issuing new licenses in certain areas and categories. For instance, no new licenses were allowed to be issued in Lisbon, the Algarve, or other key areas in Portugal.

However, there were exceptions, for example in Madeira and the Azores, interior areas, for certain categories, and entire buildings. Also, the suspension could be overturned if the Municipal Charter permitted new AL licenses.

You can find out more about the exemptions in our previous update on short-term rentals.

Existing licenses renewed every five years

Under the Mais Habitação Bill, local short-term rental registrations were capped at a five-year term, with a possible renewal for another five years, subject to the explicit approval of the relevant municipality. This policy also applied to existing licenses when the legislative package was enacted, requiring a reassessment of their validity by 2030.

The aim was to ensure regular reviews of accommodation conditions and compliance with legal and safety standards. However, this measure threatened the stability of entrepreneurs in the sector, as they faced the risk of losing their licenses every five years.

Operating license not transferred with the sale of the property

The Mais Habitação policy introduced a rule that prevented the transfer of the operating license with the sale of properties designed for local short-term rentals. This meant that licenses expired upon the sale of the property, thus devaluing properties for investors and preventing them from recouping their investments upon sale.

Increased taxes on short-term rentals

Under the Bill, the government increased taxes associated with short-term rentals. The Extraordinary Local Accommodation Contribution (CEAL) was introduced, imposing a 15 percent fixed rate on a variable taxable base. Additionally, the Municipal Property Tax (IMI) was amended to set the property age coefficient at 1 for properties with local accommodation establishments, irrespective of their actual age.

A Welcome Step that Shows Short-Term Rentals to Be Getting Back on Track

For short term rental owners or investors looking to capitalize on investing in short term rentals in Portugal, who had viewed the previous Mais Habitação measures as a threat to their business viability, these amendments are a welcome relief.

Overall, these recent legislative adjustments are expected to rejuvenate the sector, ensure its growth in the coming years and bolster the local economy, reinforcing the role of short-term rentals as a key component of tourism and the nation’s economic landscape.