Luxury homes, short lets and shacks: inside
Lisbon’s housing crisis
Wealthy overseas buyers lured by ‘golden visas’ helped
create a city where workers struggle to find homes
by Beatriz
Ramalho da Silva
Wed 22 Dec 2021
14.00 GMT
Manuela
Lopes dates her misfortune from the moment her Lisbon neighbourhood began
attracting comparisons with Brooklyn. It was the mid 2010s: former warehouses
in the old working-class parish of Marvila were giving way to co-working
spaces, art galleries, artisan breweries, creative hubs and tech startups. In
2018, average property prices in the neighbourhood were up 79.8% on the
previous year.
A short
walk from Lopes’ home, a 12-building luxury residential project designed by the
world-famous architect Renzo Piano is now rising from Marvila’s old industrial
waterfront. Prices for apartments, some with balconies overlooking the Tagus,
range from €500,000 to €925,000 (£425,000 to £786,000) and many have been sold
off-plan. Promotional material for Prata Riverside Village promises a “new way
of living Lisbon” for “young families, students, digital nomads and retired
people” in a district “distinguished by its true neighbourhood atmosphere;
quiet but full of life” .
Lopes, 77,
was born in the more modest architectural setting of the Santos Lima, a
two-storey 19th-century apartment building, where her mother and grandmother
before her raised their families. The “true neighbourhood atmosphere” was
indeed here in the early 1970s, according to former tenants, when dissidents of
the Salazar dictatorship would gather for their clandestine meetings at the Santos
Lima.
For years,
Lopes assumed her tenancy was protected by a Portuguese law that prevents
anyone over 65 years old from eviction if their lease dated from before 1990.
What she didn’t know was that an offer to move flats within the building, which
she had accepted, had voided the terms of her previous lease and in 2017, she
was given notice to quit.
Across
Lisbon, property prices were soaring, tourism was booming and many tenants were
finding themselves in a similar predicament. Lopes and her neighbours
discovered after receiving eviction notices that the Santos Lima had been sold
for €2.7m, even though 17 families were sitting tenants. Just a few months
later the building was on the market for €7.2m, advertised as having potential
for conversion to private condominiums or a hotel: perfect for a rapidly
gentrifying area of the capital on the riverfront. And empty.
Lopes has
lost count of the strange encounters she has had in the building since then.
Unnamed people started showing up in the corridors, telling tenants to leave.
Doors to vacant flats were pulled out, before being re-attached months later,
and construction work began without notice.
With most
elderly residents protected from eviction, some landlords resorted to bullying
to be able to cash in on the boom, says Rita Silva, who heads housing rights
organisation Habita. Lopes and her neighbours say what they have experienced is
closer to intimidation. People again speak in hushed, fearful voices;
suspicious not of the Salazar regime, but of the faceless owners and property
agents.
The
building itself is becoming more dilapidated by the day. Inside Lopes’ flat,
the walls have dark patches from damp and mould. On the door of one of the many
empty flats, decorations are still up from a previous Christmas.
“There is
no use in painting my place now, I don’t know when I’ll have to leave. I barely
have any energy left,” she says.
Some of the
remaining families are holding out, but Lopes, who lives on a pension of less
than €400 a month, €147 of which goes on rent, has begun to pack up her things.
“I’m scared of the day someone shows up and I’ll just have to go.”
“My doctor
says I’m halfway into a depression,” she adds. “All of this just makes me feel
small.”
Portugal’s
property market is now what analysts call one of Europe’s most “dynamic”.
Foreign investment is credited with powering Portugal’s economic recovery, but
the “collateral damage” inflicted on the social fabric of Lisbon, Porto and
other cities has been profound, says geographer and housing activist Luís
Mendes.
Unaffordable
rents and evictions are hitting not just those on subsistence wages or
pensions, but ordinary workers and their families. Their plight can be traced
to the 2008 European debt crisis. To entice foreign investment, Portugal was
required to deregulate as a condition of its international bailout. A “golden
visa” programme was ushered in offering residency permits in exchange for
real-estate acquisitions worth €500,000 or more. Those investing were not
required to move to Portugal – just to spend two weeks a year in the country. A
separate “non-habitual residency scheme” was also brought in, which gave
foreign citizens who spent half the year in Portugal a 10-year tax break on
income earned elsewhere.
To say
these schemes proved popular is an understatement: 10,000 golden visas have
been issued to non-EU buyers since 2012 in exchange for more than €5bn of
investment, most of it flooding into property. The new property owners come
predominantly from China, Brazil, Turkey, South Africa and Russia.
Luís Lima,
president of the Portuguese association for professionals and companies in
real-estate mediation (Apemip), has no doubt that the perks gave Portugal an
important “escape” from the worst effects of the financial crisis.
“Everything
that is good for tourism is good for us,” Lima says. He was among the first to
begin scouting foreign investment abroad after the crisis in 2008, and recalls:
“Some of the maps didn’t even have Portugal on them, they just had ‘Iberia’ –
now everybody knows our name.”
The Sunday
market at LX Factory complex in Lisbon.
The Sunday
market at the LX Factory complex, a former industrial site now home to bars,
cafes, restaurants and shops. Photograph: Brannon Gerling/Alamy
While the
Algarve had formerly drawn international real-estate buyers, Lisbon, Porto and
some of the coastal regions in between now became a honeypot for developers and
speculators. “We changed the paradigm,” says Lima, adding that the scheme has
been good for employment, indirectly creating “thousands of jobs”.
But Mendes,
who is on the board of the Lisbon tenants’ association, says that by turning so
much of the capital’s housing into wealth-generating assets the scheme has been
“disastrous” for many Lisbon-dwellers.
Countless
people saw their need for homes sidelined as prices soared and the safety net
for renters was swept away. A 2012 austerity measure designed to address
“rigidities” in the urban rental market became known as the “law of evictions”.
Suddenly a tenant could face a dramatic rent hike at the end of a lease or be
evicted if a landlord wanted to renovate a flat, which was previously unheard
of. By 2017, eviction rates had doubled on 2013 rates, to the equivalent of
approximately five families losing their homes a day.
Historically
a residential centre, Lisbon rents had been cheap by the standards of other
capital cities in Europe but they were in line with Portugal’s lower average
incomes. As interest from abroad began to grow, demand outstripped supply,
pushing prices up and pushing people out.
That supply
shortage narrative is only the “tip of the iceberg”, as Mendes puts it. Lisbon
also had an unusually high number of vacant houses until around 2010. At least
a third of buildings in the historical centre were vacant, many in a state of
degradation, Mendes says. It was a golden opportunity for investors.
In the
frenzy that followed, buildings were changing hands for €1m one night and
selling the next morning for €1.7m. “Sometimes with only mild renovations,
properties bought for €60,000 or €70,000 six years ago are now worth €400,000
or €500,000,” Mendes says.
Tourism,
meanwhile, introduced Lisbon to Airbnb-style short-term rentals. “Anyone could
have a room or a sofa they would rent,” explains Mendes. Short lets, he says,
began to “eat” into the affordable housing market.
Once full
of decrepit buildings, faded masonry and crumbling facades, the old town was
made over at breakneck speed. Tuk-tuks filled with tourists climbed up and down
the narrow cobblestoned streets and restaurants flourished. It was not long
before Lisbon began topping international league tables as a tourism
destination and one of the most “liveable” cities in Europe.
By 2019,
Lisbon was averaging 4.5 million tourists annually, in a city of 500,000
residents, more than eight tourists for every resident. By 2020 a third of
houses in Lisbon’s historical centre were listed on short letting websites such
as Airbnb, despite curbs introduced in 2019.
The warning
issued by Leilani Farha, the UN special rapporteur on housing, in 2016 was
coming to pass. Farha had said that “unbridled touristification” in Portugal
could exacerbate evictions and bring about the emergence of “a new poor”.
Anyone on
Portugal’s minimum wage of €665 a month was certainly priced out. Today the
average rent in Lisbon, for a family, averages €700-€900 a month depending on
the district, but average earnings in the city are about €950. “A lot of people
are excluded,” Mendes says.
In 2020,
house prices across Portugal increased by 8.4%, according to the national
statistics institute (INE). “It is not just vulnerable groups that can’t access
housing, for the past three years the middle class has had a noose around its
neck – they can’t find housing in Lisbon,” says Silva. “When you look at
incomes in Portugal house prices are absurd.”
‘I just
want to live with dignity’
Dulce
Dengue and her children were woken early one morning in March 2021 by men
yelling at them and rummaging through the furniture of their rented flat in
Loures, a town in the Greater Lisbon area, 13km north-east of the city centre.
“I didn’t even have time to wake my children properly, within minutes two men
were changing the locks and told me I had to leave,” she says. She was served
with a court order to vacate the premises.
Dengue had
lost her jobs as a cleaner and a seamstress at the start of the pandemic. She
admits she had not been able to keep up with her rent.
The
circumstances of the case are still the subject of legal proceedings. But the
single mother, her own three children – the youngest just 18 months old at the
time – and two nieces found themselves without a roof over their heads. Four
other families who had been living in the same block also ended up homeless.
“We had to
stay outside in the cold, it was awful, I had to feed my children on the
street,” she says.
Property
inflation has now rippled out from Lisbon to outlying municipalities such as
Loures, say campaigners. “It is almost like aftershocks of an earthquake,” says
Silva. Mendes agrees: “It has moved from the epicentre … out through the city
peripheries and suburbs.”
The
difficulty for people like Dengue is that Portugal also has one of the lowest
rates of social housing provision in Europe, with only 2% of all housing
publicly owned, compared with 17% in the UK, 16% in France and 24% in Austria.
She was initially
placed in a hostel paid for by the local authority. Her children were
exhausted, as it took an hour to get to school, she says. “They kept asking me
when we could go home.” The courts eventually revoked Dengue’s notice to quit,
a decision that is being appealed. In the meantime, the family have been
shuffled between hostels and temporary shelters.
“I ask for
assistance,” Dengue wrote in an open letter to the housing minister earlier
this year. “I don’t know how to deal with the tears of my children who don’t
know when they will return home. I don’t know how to deal with the uncertainty
of life, with the coming and going, sometimes I feel myself losing strength to
keep fighting. I just want to give a dignified life to my children. I just want
to live with dignity.”
“Dulce’s
case is an example of many things that are boiling in this country – people losing
their income in the pandemic, particularly people who were already in a
precarious situation,” says Silva.
The “build
to rent” market, meanwhile, has taken off on the capital’s margins. Loures is
attracting a steady stream of buyers of what the Portuguese branch of JLL, an
international real estate company, calls “multifamily assets” – residential
buildings entirely for rental purposes.
Gonçalo
Santos, the head of capital markets at JLL, is adamant that the golden visa
programme has played a positive role in consolidating Lisbon as an investment
destination in the global marketplace. That, he says, is entirely compatible
with the creation of affordable housing. Taking Lisbon out of the golden visa
scheme, as the government plans to do next year, will not just be “terrible for
business”, it will reduce the supply of homes, he says.
Faced with
mounting public pressure the Portuguese government established a housing
secretariat in 2017, and in answer to a growing protest movement a law giving
effect to the constitutional right to adequate housing dating from 1976, was
finally approved in September 2019.
The first
comprehensive government inquiry into housing, published in response to the
findings of the UN special rapporteur on housing revealed that 25,762 families
were living in “grave housing poverty”, nearly 50% of them in Lisbon.
These are
people in what Silva calls “situations of degradation often without access to
running water”. More than 11,000 families live in shacks and self-built
dwellings clustered in shantytowns or other “informal settlements”.
Astonishingly these figures do not include overcrowded homes or households at
risk of eviction.
The housing
secretary, Marina Gonçalves, says the government’s priority is to increase
social housing’s share from 2% to 5%. But she acknowledges “this will take
time”.
For
decades, she says, housing in Portugal was left to market forces. Public
housing was not prioritised. “We have to find the answers, we can create market
incentives, but we can’t think the responsibility lies with the market, the
responsibility lies with the state to promote public housing policies.”
When the
pandemic struck, the government suspended evictions and introduced a temporary
moratorium for people in mortgage arrears. But in the absence of a massive
programme of public investment in housing, Mendes believes, the pandemic is
storing up a wave of future evictions and a potentially explosive crisis.
“It was
already grave and will become aggravated as people’s economic and social
situation becomes more precarious,” Silva agrees. “The price of housing did not
decrease with the pandemic – housing remains inaccessible in Lisbon.”
The
cleaners and carers who live in squats
Dam works
as a security guard in a supermarket, where she is on the minimum wage doing
nightshifts. Despite being in paid employment, the single mother lives in a
squat in a vacant, vandalised council flat on Lisbon’s outskirts.
She moved
here when conditions in the flat she had been renting became so unsanitary that
staying was not an option. In the squat, the windows are broken so she keeps
the blinds down to keep out the cold. “When I got here, the rubbish was higher
than me, the walls were filthy.”
Dam, 40,
supports two of her children and until recently was also the main carer of her
disabled mother, who has since died from pneumonia. The family has been on a
waiting list for public housing for almost a decade, living in the squat for
the last three years. Although the fear of eviction hangs over them daily, Dam
feels she has little choice. She has tried hard to turn the place into a home,
fixing up the bathroom and painting the walls.
“I’ve done
what I can with my means. Everybody knows I’m here; everybody knows my
situation. I took photos of when I arrived, of the work I’ve done to the house,
I have sent letters out everywhere,” she explains.
Dam is far
from unique. Increasing numbers, many of them single mothers, who struggle to
pay rent in the city despite having jobs, are resorting to unlawful occupation.
Many of those living in informal settlements or occupying empty buildings work
as cleaners and carers, and during the pandemic have been on the frontlines of
the capital’s public health emergency.
Dam got her
hopes up recently after being offered an appointment to discuss her social
housing application – but was told there were still no vacancies. She is
beginning to lose faith, saying: “There are thousands of people waiting like
me.
“I don’t
know what else to do, I can’t live in anguish for the rest of my life, this is
not how I want my children to grow up.”
Portugal’s
luxury housing market isn’t just defying the pandemic, it is thriving.
According to Portuguese databank Confidencial Imobiliário, foreign investment
made up 40% of housing investment in Lisbon in 2020, while Knight Frank’s 2021
wealth report places Lisbon among the few cities in the world where the luxury
segment has scarcely been touched by Covid uncertainty, with prices up by 4%.
Lima says
this has no bearing on the lack of housing for people at the bottom of the
income scale. “People were surprised to see prices rising in a pandemic, it’s
the market functioning.”
Looking
back at the impact of deregulating the housing market and the golden visa
programme, he admits the pace of Lisbon’s transformation has been startling.
“It surprised many specialists, myself included – how fast we recovered from
that crisis – and the cherry on top of the cake was foreign investment.”
The lack of
affordable houses is, he says, a political failure. “There is a view that
foreign investment takes homes away from the Portuguese, but this has nothing
to do with it – these are completely different sectors.”
The days of
the golden visa as it currently operates appear to be numbered. António Costa’s
socialist government promised to remove residential properties in Lisbon, Porto
and the Algarve from its scope but put off the reform until January 2022 to
cushion the impact of the pandemic. Applications were up 13% in 2021.
From next
year, overseas buyers will still be able to put their money into Portuguese
property for a tax advantage, but in regions of lower population density.
Even Lima
concedes that for low-paid workers the options remain scarce. “It’s not enough
to have the right to housing in the constitution,” he says. “I don’t know how
any young person with a reasonable job can pay for a house in Lisbon today.
Even if you earn €1,000 a month, you shouldn’t have to pay more than €300
[rent] – and this isn’t the reality in the city.
“Some people
say our prices are only a fraction of those in Madrid, London or Paris – of
course, but our standard of living is not that of the Spanish, British or
French.”
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