TLDR: Portugal’s government approved a major overhaul of its rental housing law on July 9, 2026, cutting the eviction timeline for unpaid rent and lifting most rent caps on new contracts. Lower income households and pre-1990 tenants keep some protection, and a new Housing Emergency Fund is meant to soften the blow, but tenant groups say the whole thing favors landlords.
A Housing Crisis Forces the Government’s Hand
Portugal’s rental market has been under pressure for years, and the numbers tell the story. Rents climbed roughly 10% in a single year, and the median rent on new contracts grew faster than wages. In some regions, renters are reportedly handing over most of their income just to keep a roof over their heads.
The center-right government, led by Luís Montenegro, decided the old approach wasn’t working. So on July 9, 2026, the Council of Ministers signed off on a sweeping reform of the urban rental system, part of a wider housing package called “Construir Portugal.” Miguel Pinto Luz, the Minister for Infrastructure and Housing, framed the changes around what he called contractual “balance and freedom” between landlords and tenants.
What’s Actually Changing for Landlords and Tenants
The core idea is simple, even if the politics around it aren’t. The government wants more landlords to feel comfortable putting properties on the market, and it believes the previous rules scared too many of them away.
Faster Evictions, Fewer Rent Caps
Under the new rules, landlords can start eviction proceedings after just two months of unpaid rent, down from the current three. And for brand new rental contracts, rent will be set freely between landlord and tenant, with most of the existing caps removed. That’s a direct reversal of parts of the “Mais Habitação” (More Housing) program, which the previous Socialist government introduced in 2023 specifically to protect tenants.
Critics call this a step backward. Supporters call it overdue. Either way, it changes the leverage in the room the moment a lease gets signed.
A Safety Net for Lower-Income Households
Not every tenant gets thrown into the open market, though. Households earning under €64,400 a year will fall under Portugal’s New Urban Rental Regime (NRAU), where rent stays protected for five years. Tenants holding pre-1990 leases, the last holdovers from Portugal’s old rent-freeze era, also keep their existing protections. The government clearly wanted to avoid a headline about elderly tenants losing decades-old apartments overnight.
The Money Behind the Reform
Rental law doesn’t exist in a vacuum, and Portugal backed this reform with real financial incentives.
Tax Breaks for New Rental Supply
Decree-Law 97/2026, which took effect on May 20, 2026, cut VAT to 6% on construction or renovation of residential properties meant for long-term rental. It also created a simplified affordable rental regime, known as RSAA, replacing an older 2019 rental support program. Landlords who rent at moderate rates now pay just 10% tax on that rental income through the end of 2029, and tenants can deduct up to €900 in rent from their income tax this year, rising to €1,000 in 2027.
The government also set up a Housing Emergency Fund, run by the Institute for Housing and Urban Rehabilitation (IHRU) and paid for out of the state budget. It’s meant to catch families who get squeezed by the faster eviction rules. For context, housing support in 2025 already totaled around €700 million, so this isn’t a small side project.
Pushback From Tenant Advocates and the Opposition
Not everyone’s convinced the trade-off is fair. The Socialist Party’s parliamentary group has argued the reform turns access to housing into what it called an “auction,” warning that removing rent caps on new contracts strips away the last real check on prices. Tenant advocacy groups echo that concern, pointing out that most renters aren’t missing payments because they’re careless. Many are already cutting back on food and other essentials just to make rent, which makes a faster path to eviction feel less like a technical fix and more like a threat hanging over every late payment.
The government’s counterargument is that thousands of properties are sitting empty because owners don’t trust the current system, and loosening the rules will pull those homes back into circulation. Whether that actually happens, and how fast, is the open question nobody can answer yet.
What Happens Next
This reform isn’t law yet. It still needs debate and approval in the Assembly of the Republic, and its final wording could shift before it’s published in the Diário da República, Portugal’s official gazette. Only then does it take effect.
For now, landlords and tenants alike are watching the same thing: whether lawmakers soften the eviction timeline, widen the income threshold for protected rents, or leave the package largely as the Council of Ministers approved it. Portugal’s housing crisis isn’t waiting for an answer, and neither are the people trying to rent a place to live in Lisbon, Porto, or anywhere in between.
