Portugal rental shake-up: rent caps lifted for new contracts and evictions sped up

Why buyers, landlords and renters must pay attention now

If you're watching Portugal property, this matters: the Government approved a package of rental reforms on 9 July that will change how rents are set, how deposits work and how quickly eviction proceedings can start. We think these measures are ambitious and controversial in equal measure — they aim to push more homes into the market, yet they also transfer more power to landlords on new contracts.

The changes affect both new tenancy agreements and older contracts signed before 1990, and include revised rules on non-payment, security payments, and a state-backed support fund for displaced tenants. The plan now moves to the Assembly of the Republic for approval. In this piece we explain what is changing, who gains and who loses, and what investors and prospective tenants need to do next.

The headline change: rent controls removed for new contracts

The most striking reform is the end of the 2% cap on rent increases for new tenancy agreements. The Government has brought the change forward by three years — it will apply from 2024, instead of the previously planned 2029. According to Minister Miguel Pinto Luz, rents for new contracts will now “be freely set by the parties.”

What this means in practice:

• Landlords and incoming tenants can negotiate any level of rent on new agreements; the legal 2% limit no longer applies to new contracts.
• Existing contracts remain subject to their current rules until they expire or are renegotiated, unless they are transitioned under the new arrangements for pre-1990 contracts (see below).

This is a clear shift away from a policy that had been used to restrain rent growth. The 2% cap had been introduced to prevent shocks and to discourage landlords from ending tenancies just to re-let at higher prices. Removing it opens the door to faster rent adjustments in high-demand areas such as Lisbon and Porto, but it also restores contractual freedom between parties, a key argument used by the Government.

Deposits, advance rent and contract duration: more landlord-friendly terms

The reform adjusts several technical contract elements that affect affordability and access:

• Advance rent: landlords may now request three months’ advance rent, up from the current limit of two months.
• Security deposits: the previous cap of two months’ rent is removed; there will be no explicit maximum deposit amount for new contracts.
• Automatic renewal: landlords can refuse automatic renewal of contracts provided they give prior notice. Minimum and maximum contract lengths remain at one year and 30 years respectively.

From a tenant-access perspective, these changes raise clear barriers. Higher upfront cash requirements make entry harder for lower-income renters or younger households. For landlords and investors, the changes reduce perceived financial risk and increase flexibility in pricing and contract management.

Evictions: proceedings can begin earlier

The Government has shortened the period that must elapse before eviction proceedings for non-payment can be initiated. Under the new rules:

• Eviction proceedings may start after two months of unpaid rent, instead of the current three months.
• In cases of repeated delays, proceedings may be launched when there is a delay of eight days or more on more than three occasions within 12 months, or more than four times within 18 months (consecutive or non-consecutive).

The stated aim is to speed up court processes and reduce bureaucratic bottlenecks. Our analysis is that faster evictions will improve certainty for property owners, potentially encouraging more supply, but it will also increase the risk of displacement for precarious tenants who face short-term income shocks.

A state safety net: Housing Emergency Fund details

To offset the quicker eviction route, the Government proposes a Housing Emergency Fund managed by the IHRU (Institute for Housing and Urban Rehabilitation). Key points:

• Support will be equivalent to one IAS (Social Support Index), currently €537.13, paid to cover accommodation or rehousing costs.
• The Fund can provide up to €2,300 per month, for a maximum of six consecutive months.
• The Fund will be financed from the State Budget; the Minister did not disclose the total allocation for the Fund.

The Fund is an important concession. We note that while the monthly cap of €2,300 can cover market rents in some areas, the effectiveness of the Fund depends on how quickly payments are processed and how many households will be eligible. The Minister mentioned that housing support granted by the Government in 2025 totalled €700 million, but details on new Fund funding remain absent.

Special rules for pre-1990 tenancy contracts

Contracts signed before 1990 are being addressed with transitional rules that depend on tenant age and household income. The changes are complex but worth spelling out:

• For tenants under 65 with annual income below €64,400, the rent will remain unchanged for five years.
• If the same tenant’s income exceeds €64,400, the rent may be updated to 1/15 of the property’s Taxable Asset Value (Valor Patrimonial Tributário, VPT).
• For tenants over 65, the contract will not transition to the NRAU. However, if the household’s annual income exceeds €64,400, the rent will be updated to 1/15 of the VPT.

These rules attempt to protect lower-income and older tenants while creating a path to market-linked rents for higher-income households. Using the VPT formula puts rents on a property-specific footing that can raise incomes for landlords of older contracts, but it may also trigger disputes over valuations and affordability.

What this package means for different market players

We break down the consequences for key groups.

Landlords and investors

• Positive: faster eviction routes, higher allowable advance rent and uncapped deposits reduce financial exposure and strengthen control over new contracts.
• Negative: political risk increases; removing rent caps may provoke local opposition, and markets with rapid rent rises can draw regulatory pushback in future.

Tenants and tenant advocates

• Negative: higher upfront costs and faster eviction timings reduce security, especially for low-income renters and those with irregular incomes.
• Positive: the Housing Emergency Fund offers temporary financial support for displaced households, but eligibility and scale are uncertain until the Assembly approves the bill and funding details are set.

Property market and wider housing supply

• The Government’s stated objective is to bring more property into the rental market by restoring contractual freedom. If landlords perceive higher returns and lower risk, some may re-list units currently withheld.
• However, the short-term effect may be higher asking rents in competitive districts. That can push households into peripheral locations or shorter-term solutions like short-stay tourism rental markets.

Risks, loopholes and implementation challenges

Every policy shift has downsides.