Experts Warn: New Government Land Policy Could Trigger Major Flood Risks and Housing Crisis in Portugal

Experts Warn Against New Land Policy

The recent decision by the Portuguese government to allow construction on rural land beyond urban perimeters has sparked significant controversy. This measure, presented in Decree-Law 307/XXIV/2024, was criticized during the launch of the book Public Policies on Land Use, Urbanism, and Housing by Demétrio Alves, which gathered various experts and university professors at the Instituto Superior Técnico (IST) in Lisbon.

Ineffectiveness of the Measure

Experts argue that this policy will not effectively address the housing crisis in Portugal. Demétrio Alves, a former mayor of Loures, pointed out that the housing market operates outside the traditional laws of supply and demand due to its highly deregulated nature. He cited data from the National Institute of Statistics, stating that even with increased housing construction, prices continued to rise due to factors such as real estate funds and commercial banking practices.

The rapid increase in housing prices has also outstripped inflation rates for building materials, which have surged since the onset of the Russia-Ukraine war. Alves noted that prices are influenced by mortgage interest rates and speculative financial activities.

Urban Flood Risks

The government's justification for this new "exceptional regime" is to provide housing solutions compatible with existing urban areas. Municipalities can allow construction on these lands, provided that 70% of the buildings are designated for public housing or moderate pricing. However, critics like Paulo Correia, a professor at IST, express concern over the construction in flood-prone areas, stating that urban expansion increases the risk of flooding.

A Grave Housing Problem

Portugal has seen the highest housing price increases in Europe since 2019, second only to Israel globally. While the government has proponents for this reform, such as Fernando Santo from the CIP, who believes it will reduce land costs, there is skepticism about its effectiveness. Critics argue that the root issue lies not in the number of houses available but in the production costs and licensing difficulties.

They emphasize the need for public policies to regulate the housing market and manage the colossal number of vacant homes—around 430,000 in 2022. Alves advocates for focusing on urban rehabilitation rather than expanding into rural areas, suggesting that only 47,000 to 60,000 new homes are needed annually, with half coming from rehabilitation efforts.