There are fresh developments on the rental reform that completes the wider package of measures aimed at tackling Portugal’s housing access crisis.
The Government approved a set of changes in the Council of Ministers on Thursday, 9 July, affecting both new tenancy agreements and older contracts signed before 1990. There are also updates on non-payment of rent and the speeding up of evictions. Here’s what's changing in Portugal's rental market.
At the end of the Council of Ministers meeting on the rental reform, Miguel Pinto Luz, Minister for Infrastructure and Housing, framed the measures around the principles of contractual “balance and freedom” between landlords and tenants. The aim is to bring more properties onto the market to address the housing crisis.
End of rent controls on new contracts
One of the most significant measures is the removal of the 2% cap on rent increases for new tenancy agreements, bringing this change forward by three years compared to the previously set deadline of 2029. Rents will now “be freely set by the parties”, as explained by the Minister for Infrastructure and Housing.
The 2% cap had been introduced by the previous Socialist Party government to prevent sharp rent rises, with the intention of discouraging landlords from terminating existing contracts in order to sign new ones at higher prices.
Changes to advance rent and deposits in new tenancies
There will also be changes to the rules on advance rent payments and deposits made at the start of tenancy agreements, aimed at protecting property owners. Landlords will be allowed to request three months’ advance rent, instead of the current limit of two. As for security deposits, there will no longer be a cap on the amount, whereas until now they could not exceed the equivalent of two months’ rent.
Automatic renewal of contracts may now be refused by landlords, provided prior notice is given. The minimum and maximum duration of contracts remains the same: they must last at least one year and no more than 30 years.
“The changes are intended to restore greater contractual freedom to the parties, remove constraints considered outdated, and create conditions for a more dynamic, transparent and attractive rental market,” reads the Government’s official statement published on its website.
Evictions move ahead after two months of unpaid rent
The Government intends to allow evictions for rent arrears after two months of non-payment, instead of the three months currently required by law.
In cases of repeated non-compliance, eviction proceedings may begin whenever there is a delay in payment of eight days or more on more than three occasions, consecutive or non-consecutive, within a 12‑month period, or more than four times within 18 months.
“These changes aim to reduce bureaucracy, speed up procedures and strengthen legal certainty, while maintaining the protection of tenants who meet their obligations,” the Government explains in the document.
New support for displaced tenants
To offset the easier eviction process, the Government plans to create a Housing Emergency Fund to support lower-income families. They will be able to apply for social support for rehousing equivalent to one IAS (Social Support Index), currently €537.13, to cover accommodation or rehousing costs of up to €2,300 per month, for a maximum of six consecutive months.
The Fund will be managed by the IHRU (Institute for Housing and Urban Rehabilitation) and financed through the State Budget. Minister Pinto Luz did not specify the total amount that will be allocated to this purpose. He did note that housing support granted by the Government in 2025 amounted to €700 million.
Old rents may be updated…
The Government has also approved new rules for transitioning tenancy agreements signed before 1990 to the New Urban Lease Regime (NRAU). The changes depend on tenants’ age and annual income:
In the case of tenants under 65, with an annual income below €64,400, the rent will remain unchanged for five years.
If income exceeds that threshold, the rent may be updated to 1/15 of the property’s Taxable Asset Value (Valor Patrimonial Tributário).
For tenants over 65, the contract will not transition to the NRAU.
However, if the household’s annual income is above €64,400, the rent will be updated to 1/15 of the property’s Taxable Asset Value.
This rental reform now moves into the legislative process and must be approved by the Assembly of the Republic. Miguel Pinto Luz said that the measures approved by the Council of Ministers resulted from “close dialogue” with political parties.
As part of the wider housing package, Parliament is also expected to hold a final vote on 17 July on a new bill allowing a single heir to initiate legal proceedings for the sale of properties, urban or rural, that form part of inheritances remaining undivided for more than two years due to lack of agreement between heirs.
With Lusa
*News updated on July 10th, at 11:17 AM, with information from the official government statement.
