The tax change to fix the housing crisis

1) Portugal does not only have a housing shortage. It has a housing-use problem.

2) Portugal has made it too cheap to sit on valuable housing while doing nothing with it.

3) As they say, fix the incentives and you change the behaviour.

In Lisbon alone there are over 48.000 empty dwellings (around 15%, https://amensagem.pt/2023/02/24/housing-shortage-lisbon-15-empty-houses-crisis/). If an average of three people could live in each one, that is theoretical housing for almost 150,000 people without building a single new apartment. Lots of housing is onwed by the CML and Santa Casa, and they should be reformed to make better use of what they own and mismanage. But a lot of it is also in private hands.

The heart of the problem: real estate naturally gains value with time. So the rational thing for many owners is to wait. Wait for a higher offer. Wait for the market to rise. Wait for the heirs to agree. Wait for someone desperate enough to overpay.

Meanwhile, young people leave. Couples delay having children. Neighbourhoods become half museum, half investment portfolio.


Solution: Tax simplification + Better targeting. Primary residences should be protected with a property tax exemption for all primary residences up to a reasonable value cap. Combined with a high (3-5%) yearly property tax on any secondary, vacant, speculative property. Property taxes should be based much closer to real market value, using simple neighbourhood price-per-square-metre data instead of the outdated and bureaucratic Valor Patrimonial fantasy.


Big exemptions on the home people live in + smart high taxes on everything else would correct the incentives and lead to a rebalancing of the housing market. And while we’re at it, we should get rid of the distortionary IMT tax.

Personal rant:
As an entrepreneur I try to see the opportunity in the disfunction, but I have seen that its too profitable to do nothing when you own land. I know of a building that was inherited in 1959 and is sitting there empty. Another one in the city centre that is 30 years unoccupied because the heirs cant be arsed to rent it or sell it for a reasonable price. Both of these just accruing value as prices get more and more unaffordable.

Right now there are surcharges for vacancy, but that is hard to prove and I’ve seen people game the system by turning on a light and opening a tap once a month, or pretend a ruin is “under renovation” for twelve years.