In low-wage Portugal, Europe’s housing crisis bites deep

Portugal’s center-left Socialist government is set to approve a package of measures to address the country's housing crisis

Like a growing number of people in Portugal, Georgina Simoes no longer earns enough money to afford a place to live.

The 57-year-old nursing home carer earns less than 800 euros ($845) a month, as do about a fourth of the country's workforce. For the last decade, she got by because she’s been paying just 300 euros a month for her one-bedroom apartment in an undistinguished Lisbon neighborhood.

Now, with rents soaring in the capital, her landlord is evicting her. She says she’s not budging because finding another place near work will be too expensive.

“You live in this state of anxiety,” she says in her apartment with its partial view of the River Tagus. “Every day you wake up thinking, 'Am I staying here or do I have to leave?”

Simoes and many others, increasingly including the middle class, are being priced out of Portugal's property market by rising rents, surging home prices and climbing mortgage rates, fueled by factors including the growing influx of foreign investors and tourists needing short-term rentals. Deepening fears in recent days about the health of financial institutions, as well as the prospect of continuing high inflation, have added more uncertainty.

Portugal’s center-left Socialist government last month unveiled a package of measures to address the problem, and some of them are set to be approved by the Cabinet on Thursday.

Between 2020 and 2021, house prices in Portugal shot up by 157%. From 2015 to 2021, rents jumped by 112%, according the European Union's statistics agency Eurostat.

But the rising cost of real estate tells only part of the story.

Portugal is one of Western Europe’s poorest countries and has long pursued investment on the back of a low-wage economy. Just over half of Portuguese workers earned less than 1,000 euros ($1,054) a month last year, according to Labor Ministry statistics.

Across the EU, the recent spike in inflation, especially rising food and energy prices, and the lingering economic and labor consequences of the COVID-19 pandemic have aggravated the housing dilemma in the 27-nation bloc.

More than 82 million households in the EU have difficulty paying their rent, 17% of people live in overcrowded accommodations and just over 10% spend more than 40% of their income on rent, the the bloc says.

Hit hardest by unequal access to decent, affordable housing are young people, families with children, the elderly, those with disabilities and migrants.

In Portugal, the problem has been magnified by tourism, whose robust growth before the pandemic has come roaring back, as well as an influx of foreign investors who found relatively low real estate prices in Lisbon and have been driving up prices that force local people out of their neighborhoods.

After attracting a record 25 million foreign tourists in 2019, Portugal drew 15.3 million last year — a 158% rise after the previous year of pandemic restrictions. Analysts expect a 33% rise this year.

For some people, that long-awaited national success with foreign vacationers is a case of being careful what you wish for.

Rosa Santos, a 59-year-old born and raised close to Lisbon’s 14th-century St. George’s Castle overlooking the port city, says most homes in her neighborhood are occupied by short-term vacation rentals, largely for foreign tourists. It's common to see and hear visitors dragging suitcases over the cobblestones.

The locals’ rich traditions are gone, and there’s not even a bakery or grocery store there now, Santos says.

“It’s not a neighborhood anymore,” she said. “This isn’t a city, it’s an amusement park.”

On a recent rainy day, police helped municipal workers using backhoes demolish several illegal makeshift dwellings on Lisbon's outskirts with no power or running water. The families forced by necessity to live in them pleaded for them to stop.

The shacks stood just a few kilometers (miles) from luxury condominiums being built on the Lisbon waterfront, where a four-bedroom apartment sells for 2.4 million euros.

Not far away, in the Camarate low-income district close to Lisbon airport, missionary worker Jose Manuel helps needy families, some of whom can’t afford to pay for a room, let alone a house, and are consequently being pushed out of the city.

“We are talking already of a room in Camarate for 400 euros, a house for 600 or 700 euros,” he said. “Those who are on a minimum wage cannot afford a house.”

Prime Minister Antonio Costa says cities that lose their inhabitants forfeit their “authenticity” and become “a Disneyland” for tourists.

Among the measures that his government hopes will bring about a market correction:

— Forcing the owners of unoccupied properties to rent them out, granting priority to renters under 35, single-parent families or families whose income has dropped by more than 20%.

— Capping increases in new rental contracts to 2% above the previous contract.

— Ending the government’s “golden visa” program, which grants residence permits to wealthy foreign investors who buy property in Portugal.

— Halting new licenses, except in rural areas, for short-term vacation rentals through tourist accommodation platforms.

— Switching commercial property to housing use.

The proposals have stirred controversy: Some see them as heavy-handed and misguided, others say they lack detail on how they will work. And some are angry.

Hugo Ferreira Santos of the Portuguese Association of Real Estate Developers and Investors said foreign investment has ground to a halt as people wait to see how the golden visa changes shape up.

“What I have been hearing from international investors is that Portugal is not a credible country,” he said. “It is a country that changes the rules of the game halfway through and a country where foreign investment is not welcome.”

Small-time investors in apartments for short-term vacation rentals also are aggrieved.

“There are people that left their lives, set up their own businesses, generated jobs, have workers and suddenly one day they are knocked down without any prospect,” said Eduardo Miranda, head of a Portuguese association representing their interests, said.

Some measures will require parliament's approval, and others could be sent to the Constitutional Court for vetting.