Before an audience of international investors and real estate players during MIPIM, the largest gathering of real estate investors and developers, the public and private entities shared the stage, to address the affordability solutions for the Portuguese market.
The municipalities of Lisbon, Porto, and Almada were in charge of presenting their ongoing investment projects at the Portuguese Conference organised in partnership by Iberian Property (Iberinmo Group) and APPII, which was held as part of the fair on the 13th of March.
Filipa Roseta, Deputy Mayor for Housing of Lisbon City Hall, presented the Lisbon Affordable Rent Program, highlighting three pillars: public, private, and partnership. With more than 23,500 municipal residential units the focus for new solutions now lies in the intersection between public and private entities.
Besides having the largest municipal housing stock, Lisbon also has publicly owned land with potential to incorporate 9,000 housing units (2,000 of which might come to the market through rehabilitation). Digging deeper into the figures, the municipality has the goal of bring 4,000 affordable units to the market by housing partnerships – for the effect, their proposal is to apply a 90-year lease with approved urban planning on the land. Transmission of leasehold is admitted with no interference from the public partner, and rents must be 20% below market price (the criteria to choose the investor to whom award the land is based on the most competitive rent proposal).
Going one step further on tackling affordability issues, Filipa Roseta also explained that the municipality is available to pay for the gap between the 30% family’s earnings and the final rent value. In these housing partnership operations Lisbon has already 647 units ready to launch, divided in two projects in the areas of ‘Parque das Nações’ and ‘Benfica South’.
Following the same approach, Pedro Baganha, Deputy Mayor for Urban Planning and Housing of Porto City Hall, presented the Porto Affordable Rent Program. He started by recalling that 11% of all dwellings in Porto belong to the municipality, which translates in having 13% of the habitants as their tenants. For Pedro Baganha the affordability crisis deserves special attention in what respects to the middle class.
“The affordable stock represents only 2% of public housing, which is clearly not enough, but important steps are already being taken”.
Currently, Porto has more than 13,000 municipal housing units and the new affordable rent policy is expected to significantly increase it. In this matter, from the public investment side the ongoing projects sum up 992 new dwellings, with the largest project coming into public tender during the next month – specifically, the project is located in ‘Lordelo do Ouro’ and will have 300 new dwellings through a 65,6 million euros investment.
In regard to the private investment, the municipality has a pro-development plan, designed to increase densification and create new economic activity zones. The city masterplan includes areas with tax incentives for affordable housing. “In 2023, Porto was a top performer nationwide in licensing new houses, with 2,035 new dwellings licensed, something we are very proud off”, stated the deputy mayor.
Finally, addressing the Private-Public partnership models (PPP), the “Porto com Sentido” program is the municipal solution to attract investors to join the affordability offer. With tax exemptions and the possibility of immediate liquidity, rents are established close to the market value and Porto assures 100% occupancy since the tenant is the municipality itself (Porto agrees on a 10-year lease while sub-renting it to families, in order to not having any rental risk for investors). 270 units were delivered to date under this scheme, and Pedro Baganha revealed that there are ongoing negotiations to close the first BTR development with this program as well. Here we note that there is a 90-year concession with 30-year rental contracts with the Municipality.
"The country should come along together to comply with the new market dynamics".
Inês Medeiros, Mayor of Almada City, stressed that new generations no longer rent a house for their whole life, and municipalities should be proactive in understanding that housing serves citizen and needs to be flexible enough to fit in rental decisions according to people life stage, which sets a challenging dynamic in the market.
With 2,314 municipal residential units, the Almada policy for Affordable Housing is centering their attention in rent subsidies, taking into account that both sale and rental prices per sqm in the city grew by more than 12% during the last year.
Inês Medeiros defended that by having this discussion in France, Portugal should examine closer the hosting country model, in which the private sector is managing social housing, something “worth reflecting on”, according to her.
The private sector and the affordable housing programs
In a round table moderated by António Gil Machado, Partner of Grupo Iberinmo, private representatives from Krest, Fidelidade, and Vizta, commented the attractiveness of these public initiatives.
For Fernando Vasco Costa, CEO of VIZTA, the legal Framework is still in need of some fine-tunes, but together with APPII they are working in amendments to make it more investment friendly. Still, one of the main challenges of these public proposals is the sale market rivalry. “When you have so few projects licensed in the cities it is easier to just put them into the sale market, which investors now will most likely have a good level of demand”.
Claude Kandiyoti, CEO of KREST, a family-owned developer present on the Portuguese market for the past 10 years, provided his insights on other European rental markets with a long track record. In the case of Brussels, for example the regional government had NGOs operating social housing projects.
For Claude Kandiyoti the key to make these partnerships work is to have a transparent concept, meaning that roles should be defined with the separation of developer and tenant. Besides this, “affordability doesn’t mean undervaluing the business model component, in fact it is extremely important to have an entry and exit strategy”.
The CEO informed that currently Portugal has the lowest affordable housing stock of Europe, and he is sure that at some point if municipalities want to meet their targets, they will have to buy projects already built.
Portugal has recently received good news with the approval of “Simplex” – a new licensing framework. Miguel Santana, Board Member at Fidelidade Property, believes that this framework will translate into important time saving, which can mean increased returns. The responsible of the real estate arm of the Fidelidade Insurance Company Group explained that the critical path in this matter now changed to the procurement team.
Overall, the sentiment for the future is quite positive and private investors are studying how to get along with municipalities. In the opinion of Claude Kandiyoti, the 90-years concession or lease of these new affordability programs will bring new institutional capital to the market, as financing will also be easier to get.
The Portuguese Conference ended with a complimentary Cocktail, sponsored by ENTRECAMPOS, KREST, and VIZTA, a unique opportunity to further network in the international fair and get to know better the Portuguese active players.
See all the municipalities presentations here: