May 19, 2024

Portugal’s bid to attract foreign money backfires as rental market goes ‘crazy’ | Portugal

By 7.30 on a summer night, Lisbon’s steep, beautiful streets are beginning to fill with visitors taking selfies in the soft light, trailing from bar to bar and wrestling with the nightly conundrum of where to have dinner.

Margarida Custódio, who sits at home with her three-year-old daughter, Pilar, has more pressing matters on her mind. Like so many people in Portugal, where rental prices make a mockery of the low salaries, Custódio lives through a monthly agony when it comes to covering the costs of her flat. Despite a good job in human resources, she earns €930 (£795) a month after tax – of which €700 goes on rent.

Margarida Custódio and her daughter Pilar in their living room with two dogs
Margarida Custódio, pictured with her three-year-old daughter Pilar, says she spends almost 90% of her salary on rent. Photograph: Gonçalo Fonseca/The Observer

“Here, you spend almost 90% of your salary on rent each month,” she said. “Whatever you have left over goes on gas, water, electricity and food. It’s like living on the edge.”

Meanwhile, in the Bairro da Jamaica, a rundown housing development in the city of Seixal, which lies on the other side of the 25 de Abril Bridge that is linked to Lisbon in the north, Lizandro Batista de Sousa Pontes and his children are in even more perilous straits.

The once abandoned housing estate that has been home to the 47-year-old bricklayer’s family since he came to Portugal from the African island nation of São Tomé and Príncipe in the late 1990s is scheduled for demolition.

The local council says the blocks need to come down as they were never properly finished before they were occupied and consequently lack “habitable conditions”.

Although Seixal council has so far rehoused 545 people from 185 families, De Sousa Pontes is hanging on and has brought a legal challenge to the demolition of his block, arguing that he and his children are better off there than having to squeeze into his sister’s two-bedroom flat, which is already home to five people.

Lizandro Batista de Sousa Pontes outside his rundown home
Builder Lizandro Batista de Sousa Pontes lives in the Bairro da Jamaica, a rundown housing development in Seixal, a city near Lisbon Photograph: The Observer

“They demolished the next-door block last week,” he said, while sitting in the room that was once his mother’s cafe. Outside, children were playing among the rubble and steering clear of the drug users who have already moved into the now skeletal blocks.

“We were inside the house when they were knocking it down. The house was shaking. My six-year-old started crying when he saw the demolitions because he was afraid we’d be out on the streets.”

Custódio and De Sousa Pontes know only too well what it is like to live in a country that narrowly escaped the maw of the 2008 financial crisis only to crawl, exhausted, into the waiting jaws of a resultant housing crisis.

Portugal’s economic recovery, fuelled by deregulation and a series of schemes designed to lure foreign investment, has distorted the housing market beyond all recognition in a place where the monthly minimum wage is €760 and where 50% of people earn less than €1,000 a month.

The liberalisation of the rental market, the issuing of “golden visas” that confer residence permits in exchange for buying properties worth €500,000 or more, the introduction of tax-saving “non-habitual residency scheme” for foreigners, and, most recently, the creation of a digital nomad visa to allow well-off foreigners to work remotely and pay a tax rate of just 20% have all played a part. So too – perhaps most obviously – has the snapping up of flats to be converted into lucrative short-term rentals.

And the crisis now playing out in Lisbon, Porto and other Portuguese cities, was not exactly unforetold.

Six years ago, the UN’s special rapporteur on housing warned that “unbridled touristification” would undermine the right to housing for Portugal’s most vulnerable people and predicted that the deterioration of housing and living conditions would give rise to the emergence of a “new poor”.

Agustín Cocola-Gant, a research fellow at Lisbon University’s Institute of Geography and Spatial Planning, offered a four-word summary of the crisis: “The situation is crazy.”

Like many academics and activists, Cocola-Gant uses the word “transversal” to describe the impact of the disparity between salaries and rental prices. “It affects everybody right now – not just the vulnerable population,” he said. “Some families aren’t sending their children to university because they can’t pay for a room for them, and young professionals earning €1,000 a month – which is the average salary – are finding it impossible to live.”

Rita Silva, a veteran housing campaigner and researcher, said the crisis is only serving to increase existing inequalities. “Doctors aren’t coming to big cities where they’re very much needed because they can’t afford a place to live,” she said. “It’s the same with teachers.It’s affecting society in different ways, and it’s going to have an economic impact in the future.”

She adds: “The market has become decontextualised in that it’s a market that’s no longer turned towards the people who live and work in Portugal. It’s a market that, through the policies of the government, is turned towards foreign investment.”

Both Silva and Cocola-Gant argue that the rush to drag Portugal out of the financial crisis and put the country on the global investment map has led directly to the situation today.

The liberalisation and deregulation of the property market between 2009 and 2012 saw rent controls and lifetime tenancies scrapped, and developers handed fiscal incentives for renovating abandoned and derelict buildings without any requirement to guarantee a percentage to be given over for social housing.

Then came the non-habitual residents programme, the golden visas scheme – and the arrival of Airbnb and other short-term rentals.

“There are 200 tourist beds in hotels and short-term rentals per 100 residents in the city centre – it’s double,” said Cocola-Gant. “That’s crazy. In the gothic quarter of Barcelona, which has the highest tourist pressure, there are 73 tourist beds per 100 people.”

Concerns are now growing over what Silva terms the “huge, huge influx of digital nomads”, the remote-working foreigners who have been able to secure visas since last October if they can meet a series of requirements, include monthly earnings of more than €3,040 – four times the average Portuguese salary.

Baptiste Cumin at his desk in an office
French machine-learning engineer Baptiste Cumin is among the digital nomads working remotely in Portugal Photograph: The Observer

According to Nomad List, a global online community of remote workers, there are now 15,200 such individuals in Lisbon alone.

“They’re a privileged population who take advantage of this global inequality, and they basically come here to gentrify and stress the housing market even more,” said Cocola-Gant. “But, for me, digital nomads are only a small part of the problem.”

Such accusations are not lost on some of those who have relocated to Lisbon. Baptiste Cumin, a 26-year-old machine-learning engineer who is originally from France, said he “tortured” himself for a long time over his decision to move to the Portuguese capital with his girlfriend

“The deal I sort of made with myself is: ‘We’ll move here but we’ll try to do it properly. I took my intensive Portuguese classes and learned about Portuguese history,’” he said in his shared working space at Second Home, a luminous and plant-filled office above Lisbon’s Time Out Market.

Despite doing his best to integrate – and stressing that he wants to be seen as an immigrant rather than an expat – Cumin is under no illusion about what is going on. “Before, you had people gentrifying neighbourhoods,” he says. “Now, with remote working, you can gentrify countries.”

Iva Divic-Baetens in a blue dress standing against a blue backdrop
Iva Divic-Baetens, a freelance marketing consultant from Croatia, says she is aware of the impact that she and other foreigners working remotely is having on housing in Lisbon. Photograph: Gonçalo Fonseca/The Observer

Iva Divic-Baetens, a freelance marketing consultant from Croatia who has been in Lisbon since last May, is equally aware of the impact she and others are having on housing in Lisbon.

“There’s just a huge discrepancy between what Portuguese people can afford and what we can afford,” she said. “I think my Portuguese friends are pissed at the government first of all, but I also meet a lot of people randomly who are Portuguese, and who are like: ‘Oh, you expats are taking over.’ Maybe we are a problem right now but I think we can find a solution, and I think the government is doing a bad job by not putting a cap on the market.”

Portugal’s socialist government, which won an unexpected absolute majority in last year’s snap general election, says it has already made the housing crisis a priority.

“Over the past seven years, we’ve discarded the public housing policy intended to guarantee public housing only for the social classes with fewer resources, replacing it with a universalist approach to public housing policy,” said a spokesperson for the ministry of housing and infrastructure.

The government has also announced measures to stop the golden visa scheme, declared a moratorium on short-term let licences – except those in less populated areas – and brought in a new rent subsidy that supports more than 185,000 people. Other recently announced initiatives include increasing housing stock through building, renovation and conversion, and offering tax exemptions to landlords who offer more affordable rents.

Lisbon city council, meanwhile, has already embarked on a nine-year plan to invest €800m in the “promotion of affordable housing involving the construction of new housing, rehabilitation of buildings, acquisition of affordable rental properties, reconstruction of municipal neighbourhoods for relocation, and promotion of affordable housing cooperatives, among other measures”.

A group of protesters with banner and placards
Thousands of protesters gathered in Lisbon in April to demonstrate against the housing crisis in the city. Photograph: Gonçalo Fonseca/The Observer

But as far as Silva is concerned – not to mention the tens of thousands of people who took to the streets of Portugal on 1 April for the country’s biggest housing protest – the solution is both far simpler and far more complicated.

The campaigner points out that there are 48,000 homes standing empty in Lisbon alone and 750,000 across Portugal as a whole.

Portugal, she adds, has understandably become addicted to overseas money and investment. She compares it to a country rich in gold that is prepared to let its water be polluted and its environment be destroyed in the pursuit of growth.

“It’s always the same dilemma but there are alternatives: we’re asking for rent caps and rent regulation; we’re asking for the mortgages to be regulated to guard against huge interest rate rises,” said Silva.

“We’re asking for the empty houses to be made available because it’s not acceptable to have thousands of empty houses during a huge emergency. We’re also asking for evictions to be suspended because people have nowhere to go, as happened during the pandemic.

“I don’t think that what we’re asking is impossible or radical or unrealistic. We’re just asking for things that would help solve the housing crisis.”

Custódio also believes a fundamental rethink is in order. “The thing is, you can’t solve the problem with measures like these from the government,” she said. “It needs to be solved structurally, otherwise you’re just putting a plaster on a gaping wound.”

De Sousa Pontes’s plea is even simpler: “All I’m asking is to be treated like a normal citizen, to be given the same rights as everyone else, and to have a decent place to live.”

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