The Cost of Popularity: Lisbon’s Housing Crisis

Warm weather, stunning landscapes, and vibrant architecture make Lisbon the best European capital to visit, according to various travel websites. In 2023, the city received 5.6 million foreign visits, a record-high number. Behind this glamorous facade, Lisbon is facing one of its fiercest battles: a housing crisis. Locals struggle to live in the city due to high market prices while young people are going abroad to look for a better life. According to the Portuguese Emigration Observatory, at least 30% of young people between 15 and 39 years old live abroad. Roughly 850,000 people left the country. 

The housing crisis has been decades in the making, with roots deep in Portugal’s history. Therefore, it is difficult to pinpoint an exact starting point. However, between 2012–2022 real estate prices grew 120% while salaries stayed the same. What happened? 

In the last decade, market liberalization turned housing into a valuable asset for investors seeking quick profits. Tax benefits for foreign high-income residents and digital nomads further exacerbated the problem. Gentrification and a heavy influx of tourists are taking the city by storm, with more and more people living in the streets or in overcrowded apartments. Massive protests forced the government to act, but the policies adopted were ineffective. As a result, the crisis is far from being resolved. 

According to Luís Mendes, a geographer at the Institute of Geography and Territorial Planning at the University of Lisbon, the lack of public housing is one of the main reasons for the current crisis. “Other countries invest 1%, 2% of their GDP in public housing, we never did it. We let housing needs to be utterly at the market’s mercy,” he explained to Turning Point. “To me, that’s the underlying cause: lack of public investment in housing, with the state as the builder, the same as it happens in the Netherlands, United Kingdom, Denmark, or France.”

Market liberalization, made by a series of programs and reforms, led the country to what is now described as a dramatic scenario.

The situation was never good but got worse in the ’80s and ’90s, with the slow elimination of controlled rents, as explained by Simone Tulumello, a researcher at Social Sciences Institute, University of Lisbon and author of the book Housing Beyond the Crisis: politics, conflict, right: “We had a regulation model to control the rent market. It was problematic, yes, [because] it was a mix of frozen rents, with tenants robust protections, but we eliminated that regulation system, and that got us into this crisis.”

The decisive turn was in 2012 when a government reform liberalized the market for good. At the time, Portugal was crippled by a serious economic crisis, and Troika—a term used to refer to the decision group created by the European Commission, the European Central Bank, and the International Monetary Fund—arrived in Portugal in 2011, forcing the government to implement a series of changes to cut costs and boost the economy. The laws were approved the following year with the new state budget.

Debt due to housing credits affected thousands of families, and Troika wanted to stimulate renting. The New Urban Lease Regime, a reform implemented at the time, also made it easier to evict residents from their homes, and thus became known as the “eviction law.”

In the same year, the Residence Permit for Investment Purposes—known as the Golden Visa program—started allowing investors in the country to access a Portuguese visa. This program was mainly used in the real estate market, causing a 60% increase in properties sold for at least half a million euros, according to a study published in March 2024 by the Institute of Labor Economics, Germany. 

With the rising interest in the program, new companies emerged to help investors get their Golden Visa, which requires only spending seven days a year in Portuguese territory. The impact on housing prices was enormous, but the following governments were reluctant to end this program, arguing it was still useful for attracting foreign investors.

“This is the so-called financialization of housing, in which housing is no longer faced as a human right. Its social function is emptied and becomes a financial asset”, says Luís Mendes, who is also a member of Lisbon Tenants Association (Associação dos Inquilinos Lisbonenses, AIL ). 

In 2023, the Golden Visa program went through some changes. Now, it’s no longer possible to gain a visa just by investing in real estate, but it still allows investments in funds that operate with the same kind of assets.

Added to that, there is also a special non-resident status that allows foreign people with high incomes or retirement pensions, who stay in the country for at least 183 days a year, to benefit from low or no taxes at all.

Tulumello also explained to Turning Point that the economic crisis led Central Banks to inject capital, causing a need to invest: “This is called a liquidity wall, which is fundamentally created by the quantitative easing policies implemented by the European Central Bank and the Federal Reserve. They injected a massive liquidity amount in the banks, the financial actors that were collapsing. In a time where there weren’t many chances to make productive investments, they needed to put the money in other assets, like properties.” 

In the meantime, Lisbon was gaining popularity as a travel destination. Airbnbs and hostels thrived, forcing residents to leave their city-centered homes. More and more people called attention to the pressure caused by the owners’ intention to profit from tourists. Residents were forced to leave their lifetime homes in historical neighborhoods. 

In 2019, a study focused on a single street in the Alfama neighborhood, famous for Fado restaurants, indicated a worrying case of gentrification. For instance, the area became one of Madonna’s favorite places in the Portuguese capital, she even lived there between 2017 and 2020.

In their in-depth study, Ana Gago and Agustin Cocola-Gant, investigators of the University of Lisbon, showed that between 2015 and 2017, 27 families were forced to abandon their homes located around Rua dos Remédios, Alfama. In the same period, at least 18 of those houses were transformed into tourist accommodations. The rest remained empty for a while, for investment purposes. In those two years, 150 apartments were bought in that small area, but only one was meant to be a permanent residence. Back then it was common to see real estate agents running up and down the street, asking residents if they wanted to sell their house. 

Tourism is increasing, according to the Portuguese National Statistics Institute (INE). In 2023, the sector reached new records, generating more than six billion euros in revenues. These numbers represent a 20% increase compared with the previous year and a 40% increase compared to 2019. INE also revealed that Portugal received a record 26,5 million non-resident tourists last year, which represents a 19.2% increase compared to 2022. 

But tourism isn’t the only explanation for the housing crisis. After the pandemic, with everyone around the world struggling to adapt, many companies experimented with remote-working. As a rising phenomenon, digital nomadism gained ground as a viable way of working and traveling simultaneously. Lisbon soon started to attract more and more digital nomads, who, with a higher income than Portuguese citizens, came to the city searching for cheap accommodation in a sunny country.

In 2022, the Portuguese socialist government announced a change in the laws, allowing digital nomads of non-European origin to live and work in Portugal for a year, as long as they prove they have a work contract, a residence and earn at least 2.820 euros per month, more than three times the country’s minimum wage (820,00 euros).

A year later, 2600 visas were issued by the Portuguese authorities. The United States of America, Brazil, and the United Kingdom dominated the requests. 

Delayed policies

Since 2017, the housing crisis has become a prominent subject of political debate. 

According to Eurostat, the average age to leave a parent’s house in Portugal is 33.6 years, the oldest in the EU compared to the average 26.5. Housing has a lot to do with this, since young workers have no means to rent an apartment, especially in Lisbon. Many of them live in shared houses, with four, five or more people. They have no choice but to live with strangers, which makes it very difficult—if not impossible—to make long-term plans or start a family.

Many of them can’t even stay in the same apartment for more than a year. As the owner’s keep increasing the rent, they need to keep looking for more affordable rooms. It’s a vicious cycle, where young people are unable to have stability or privacy. In many cases, the only choice is to leave the city, and go to peripheries where the prices are increasing as well. Between 2019 and 2021, 56,000 people left the city, according to the census. The majority (78%) went to peripheral locations. More than half were under 40 years old.

Immigrants also live in poor conditions. In April 2024, RTP— a national broadcast channel—showed a single apartment with four rooms where 25 people lived. In these cases, they use what is commonly known as “a warm bed system”: people sleep by turns in the same bed according to their work hours, so the bed is always being used. Authorities said more and more cases like this are being reported.

Homeless people are also increasing, and many of them are workers who cannot afford rent. Lisbon Mayor Carlos Moedas said recently there were 3,378 identified cases of homeless people in Lisbon by the end of 2023, 240 more than the year before.

People demand action

According to the Portuguese National Statistics Institute (INE), 137,000 houses are needed to address all identified situations of overcrowding and precarious housing in the country. At the same time, the 2021 census revealed 700,000 vacant houses, many of them in a poor state. Many properties are kept empty with the single purpose of making a profit from future sales. 

As the situation got worse, protests increased, and new citizen movements rose, demanding more action. Streets became filled with major protests, defending the constitutional right to adequate housing. Many activists are protesting and occupying empty buildings to call attention to the problem.

“This is a social emergency!” said Rita Silva, from the Habita housing group, during a protest in April 2023. In October, another protest took place in 24 cities across the country.

António Brito Guterres, a Portuguese activist and researcher, who studies communities and urban dynamics, says protests gained ground just when the crisis started to hit the middle class. “It should be much bigger by now, given the current situation.” The electoral power of this section of the population influenced political action that should’ve taken place long ago. 

As a member of one of the main civic movements, called Vida Justa (Righteous Life), Guterres says Portuguese society “looked from a distance” to this problem for a long time. When it affected especially the most vulnerable, it received little attention. “There’s a lack of solidarity, of union, even within the movements”.

According to the activist—who also develops social and cultural projects within communities—recent government policies, created as a response to protests, are designed to impact only the middle class and have no effect on those who suffer the most. “For me, the problem is that we should start by targeting the base [but we’re not doing that]. We should start with the poorest people, the ones with no rights or voice, because if we could solve their problems, then everyone would benefit.”

“It’s necessary to counter this commodification logic of housing rights.”

A recent OCDE report said Portugal is the European Union country where the gap between house prices and local income has widened most in the last few years.

That is one of the reasons why Guterres says Lisbon is becoming more and more a kind of “pop-up city”. Neighborhoods have no long-term residents, stores and bars don’t last more than a couple of years, all because the properties are constantly being sold. A “pop-city”, as he describes, is a city without identity, where businesses and places disappear as fast as they appeared. “Everything is affected by this. The services, the public equipment, the transportation… everything starts to deteriorate because people do not care. If, in a year or two, they don’t live there anymore, why bother trying to solve anything?”, he asks.

Researcher and author Simone Tulumello believes this problem can’t be easily fixed, and no political measures will be effective if they maintain economic interests above social needs. “It’s necessary to counter this commodification logic of housing rights”, in order to improve the overly dramatic situation in which the country (and the city) lives in.

The problem is, for geographer Luís Mendes, “every political measure is only focused on the market.” And continues, “There are no social or community aspects [being considered], and they’re also a bit blind because they have an extremely liberal vision of the problem. [Politicians] insist in trying to solve the problem with the same means as they caused it”, he says.