New Land Law in Portugal Aims to Curb Housing Speculation with Controlled Prices

New Land Law to Curb Housing Speculation

The new land law, part of the "Construir Portugal" initiative, was published this Monday in the Diário da República. This law sets criteria for converting agricultural land into "public and affordable housing at controlled costs". The reclassification of land from agricultural to urban is limited to cases where the purpose is residential or related to residential purposes and complementary uses.

A key point raised by local authorities regarding the new law is how to prevent future speculation on homes built under this measure, which must adhere to controlled cost criteria. Álvaro Bila, the mayor of Portimão, emphasized the importance of monitoring to prevent abuses or speculation.

According to Article 72-B, the government has made it clear that the sale price limit must be recorded in the land registry. Residential properties with controlled prices and limits on the sale price will be mandatory for registration. This ensures that future transactions will always adhere to the price criteria established by the legislation. To determine what constitutes a "moderate value," the price per square meter for exclusive use areas is capped at 125% of the median for the municipality or 225% of the national median.

Violations of this measure will result in nullification of the transaction, as stated in the law promulgated by the President on the 26th and now published. Additionally, 70% of the area above ground in these properties must be allocated for public housing and sold at moderate prices. The law clarifies that "moderate" does not equate to other concepts like "controlled costs," aiming to accommodate middle-class access based on local and national median values.

The construction of new homes has sharply declined from the early 2000s to this decade. The increase in land designated for residential construction not only supports the "Construir Portugal" plan but also strengthens the state’s ability to promote effective and sustainable housing policies aligned with the population's needs.

To establish these new construction zones, areas adjacent to existing urban regions must be selected, except for housing for agricultural workers, allowing construction in areas currently without urban connections. However, certain lands with high agricultural suitability are excluded from urban reclassification, including areas within the National Agricultural Reserve and various terrains identified in Article 72-B.

For these changes to proceed, municipal assembly deliberation is required, reflecting a transparent and scrutinizable decision-making process. Municipalities will have the right of first refusal after the first transfer of buildings or autonomous fractions built on reclassified lands. Concerns about potential abuse of simplified land use changes remain, as the decision now relies solely on the municipal executive and assembly, potentially bypassing current mandatory criteria for altering Municipal Master Plans.