1.Introduction
At present, virtually all OECD countries face severe housing shortages which, in turn, have caused skyrocketing rents, forced relocations, poor housing conditions, tenant abuse, and increased homelessness. These destabilising and fracturing social problems are sadly evident in Portugal, particularly in the large metropolitan areas of Lisbon and Porto. In such a stark scenario, innovative solutions that could help tackle the root cause of these problems – housing shortage – are urgently called for.
In this insight it is argued that the creation by the legislator of a new and more flexible contractual model of “Serviced Housing” could act as a complement to the current lease law, countering its perceived excessive rigidity and opening the door to new forms of investment in accommodation, notably via Built to Rent schemes. Serviced Housing is both socially desirable – effectively ensuring the constitutional right to housing and the need for a more transient workforce – and legally possible – as it can be argued that this contractual model is sufficiently distinct from a standard lease agreement.
2.Context
According to the OECD’s report “Brick by Brick : Building Better Housing Policies”, one of the most important (if not the most important) measures to solve the widespread housing shortage is to increase the supply of residential areas. This can be done in two main ways: (i) by boosting residential construction and renovation, and (ii) by making more residential areas available for lease.
The first approach, boosting residential construction, requires substantial capital investment from both the public and private sectors. Private investors, including insurance companies and pension funds, seek to recoup their investments with a profit and are more risk-averse than public entities. A significant deterrent to private investment in Portugal’s real estate market is the high legal risk associated with the frequent changes in housing construction and lease legislation, which fail to provide adequate security for landlords and investors. This legal uncertainty is reflected in final market prices, with the high legal risk deterring private investment, reducing supply, and inflating sale prices and rents. Reducing the legal risk could, therefore, help improve access to housing by making property acquisition and rental more affordable for the end consumer.
The second approach involves not only adding newly built and renovated buildings to the rental market but also ensuring that existing buildings are made available for rent rather than remaining vacant or being rented informally. A 2023 study by the Francisco Manuel dos Santos Foundation revealed that there is significant potential for growth in Portugal’s rental market. Currently, landlords are often discouraged from offering properties for rent due to high legal risk and a substantial tax burden of approximately 28% on legal lease agreements, which further encourages informal leasing in a sector lacking inspection and monitoring. Addressing these issues is crucial to making the private rental market more affordable and ensuring that the average Portuguese citizen has effective access to housing.
Given that legal risk is a significant barrier to increasing the supply of residential properties in Portugal, a legal solution that could mitigate such risk warrants discussion. Specifically, I believe that the introduction into Portuguese Law of a new contractual model of Serviced Housing should be considered.
3.Serviced Housing
For the purposes of this discussion, Serviced Housing is defined as the provision of a dwelling (furnished or unfurnished) along with an inseparable set of services for a minimum period of one month. The range of services could include utilities (such as water, electricity, and gas), internet access, and cleaning, maintenance, security, concierge services and other personal services, which would result in a set of services substantially different from those typically offered in tourism or local lodging. This model’s flexibility allows it to cater to diverse tenant needs, from short-term project-based workers to students and professionals seeking longer-term accommodations.
The implementation of Serviced Housing as a special type of service agreement is not without precedent. Similar arrangements exist in senior residences and university accommodations, which operate outside the traditional lease framework. In addition, Portuguese law allows for housing to be provided via a service agreement for the social integration of individuals in a homeless situation. These legal precedents evidence that there are no legal constraints to the development of a Serviced Housing framework that is legally robust and practically advantageous.
One of the key benefits of having a Serviced Housing legal framework is to reduce the risk of reclassification as a lease agreement. This minimises the chance that Portuguese courts could argue that Serviced Housing projects are subject to the same legal constraints as traditional leases, such as rent control and strict termination rules. A more dynamic and responsive housing market could emerge, better suited to meet the needs of a significant segment of the population.
The stipulation of a minimum one-month stay would help guarantee that Serviced Housing primarily serves residential needs rather than short-term tourist accommodation needs. This distinction is also crucial for urban planning and regulatory purposes (as well as public opinion), as it ensures Serviced Housing properties contribute to alleviating the housing shortage rather than compounding the existing problem by catering to tourists.
4.Legal Framework and Urban Planning
For Serviced Housing to be successfully integrated into the Portuguese housing market, a clear and stable legal framework is vital. This framework should delineate the rights and responsibilities of both providers and users of Serviced Housing, fostering a fair and transparent market. It should also address urban planning considerations, expressly establishing that Serviced Housing corresponds to residential use and not tourism, to avoid conflicts with local zoning laws and to ensure that Serviced Housing positively impacts the urban landscape.
The legal framework could also consider the tax implications of Serviced Housing. By offering a different tax regime compared to traditional leases, the government could encourage landlords to convert their properties into Serviced Housing, thereby increasing the supply of residential units. This could help stabilise or even reduce rental prices, making housing more accessible to the average Portuguese citizen.
To ensure the success of Serviced Housing, the government should collaborate with stakeholders to develop clear regulations that protect the interests of all parties involved. This includes defining the scope of services, establishing equitable tax policies, and integrating Serviced Housing into urban planning strategies (particularly at the Municipal level). With thoughtful consideration and strategic implementation, Serviced Housing could become a key component in addressing Portugal’s housing challenges, promoting social stability and economic growth.
5.Conclusion
The introduction of Serviced Housing has the potential to positively impact the Portuguese housing market. Economically, it could attract private investment by offering a more secure and profitable model for real estate development. This could encourage the construction and renovation of residential buildings, increasing the overall housing supply and revitalising the Portuguese private rental market.
Socially, Serviced Housing could offer a more flexible housing option for those in need, such as transient workers, students, and individuals experiencing sudden changes in their living situations. By providing a comprehensive living solution, Serviced Housing could alleviate the stress and financial burden associated with relocating and establishing a new home, and even foster decentralisation.
In summary, the introduction in Portugal of a Serviced Housing model represents a promising approach to address the current housing crisis. Offering a flexible, service-oriented housing option, would meet the needs of a more diverse and mobile population, while also presenting a viable investment opportunity for the private sector. The establishment of a stable legal framework for Serviced Housing would reduce legal risks and encourage the repurposing of vacant properties, ultimately increasing the supply of residential units and contributing to a more dynamic and accessible housing market.
