CHAPTER 1: CRISIS

The housing crisis represents one of the most significant social and economic challenges currently facing Portugal and other major cities around the world. As urban populations continue to grow, the availability of affordable housing is becoming increasingly limited, creating an imbalance that is affecting communities across the socioeconomic spectrum. This chapter aims to explore the underlying causes of this crisis, examining the impact of social and economic changes in cities, the influence of digitalisation, and the role of global factors such as tourism and real estate speculation in the evolving housing landscape.

1.1 Housing and Cities

In recent decades, we have witnessed a notable transformation in the relationship between people and the places where they live, largely driven by the digitalisation of work and increasing global connectivity. In contrast to the past, when job location was the primary factor influencing where people chose to live, today many workers have the flexibility to select their place of residence based on a range of considerations, including quality of life, housing costs, urban infrastructure and access to services.

The possibility of working remotely is an attractive proposition for professionals, particularly those who are drawn to cities with good digital infrastructure and a high quality of life, such as Lisbon and Porto. This phenomenon has the potential to increase the demand for housing in these areas, which could drive up rental and purchase prices and displace residents to outlying areas with less infrastructure. Therefore, it is important to recognise that the digitalisation of work does not necessarily solve the housing crisis, but it does highlight the inequalities between those who have the choice of where to live and those who are limited by their socio-economic conditions.

1.2 Europe and the world

The housing crisis in major European and global cities is the result of a combination of factors that transcend national borders, and it would be beneficial to consider a range of solutions that can address this complex issue. It would be fair to say that increased tourism, immigration and globalised real estate speculation have contributed to housing unaffordability to a significant extent. Cities such as Amsterdam, Copenhagen and Vienna are experiencing considerable pressure on the real estate market, driven by demand from residents, migrants and foreign investors. This has led to housing becoming a global commodity.

In metropolises like London, New York and San Francisco, housing has become increasingly challenging for the middle and lower classes to afford, due to international demand and speculative investment. It is not uncommon for foreign investors to purchase properties with the intention of holding them as financial assets, which can have the effect of reducing the supply available to residents and increasing prices. Furthermore, the influx of tourists in cities such as Barcelona, Florence and Venice have led to a shift in the use of residential properties, with many being converted into temporary accommodation. This has, in turn, led to an increase in housing costs and a displacement of residents to the outskirts.

Migration also presents a challenge to the housing market. Cities such as Stockholm, Munich and Zurich have received an increasing number of migrants, which has led to a situation where the housing market is under pressure and there is a shortage of affordable housing. Despite the existence of advanced housing policies, these cities are finding it difficult to keep up with the rapidly escalating demand, which is creating a vicious cycle that makes it difficult to effectively control housing market.

1.3 The Portuguese Paradigm

In the wake of the global economic crisis of 2008, Portugal was confronted with significant shifts in its economic landscape and housing market. The recession led to a period of inactivity in the housing construction sector, which has resulted in a shortage that has persisted even with the economic recovery. The recovery phase was marked by the growth of tourism and the 'Golden Visa' programme, which attracted foreign investors to the property market, especially in Lisbon and Porto. It could be argued that these programmes encouraged the purchase of property for speculative investment or as a second home, which has contributed to the shortage of affordable housing for local residents.

The rise of tourism, particularly through platforms such as Airbnb, has led to many residential properties being converted into temporary accommodation, which has contributed to an increase in rental prices in central and historic areas. This has resulted in the gentrification of neighbourhoods and the displacement of local populations to the outskirts. Furthermore, the lack of a robust housing policy and incentives to build affordable housing has contributed to the crisis, with limited social housing programmes and insufficient government initiatives to meet growing demand.

Although Portugal has a lower cost of living than many Western European countries, the country now faces one of the greatest disparities between incomes and housing costs, which is placing many citizens, especially younger people, in challenging housing situations.

1.4 Traditional Policies

It is recognised that traditional housing policies, which were introduced with the intention of facilitating access to housing, have unfortunately generated some unintended negative consequences that have contributed to the ongoing housing crisis in Portugal and other European cities. This chapter aims to provide an in-depth examination of three main aspects that could be perceived as having a negative impact.

• Rent Control: It could be argued that inflexible rent policies may inadvertently discourage the maintenance and renovation of properties, which could potentially lead to a decline in the quality of the housing stock. In Lisbon's Baixa Pombalina, rents that have remained unchanged for decades have unfortunately resulted in many historic buildings becoming vacant and in need of repair, which has had a negative impact on the quality of urban life.

• Construction without proper planning: It would be beneficial to consider ways of ensuring that housing expansion is properly integrated with infrastructure and public services, to avoid the creation of disconnected and unsustainable urban areas. Regions such as Amadora and Vila Nova de Gaia have experienced challenges related to traffic congestion and an increased reliance on private transportation, which have potentially contributed to a deterioration in the quality of life for residents.

• The provision of subsidies: Housing subsidies, which were introduced with the intention of relieving pressure on rental prices, have in some cases benefited large investors to the detriment of small landlords. There is also some concern that they have not increased the supply of affordable housing. The’ Reabilitar para Arrendar’ Program has been the subject of some criticism, with concerns being raised about the unequal distribution of resources and the potential impact on real estate speculation and rising prices.

In summary, traditional housing policies in Portugal have played a role in the deterioration of the housing stock, the creation of unsustainable urban areas and the perpetuation of real estate speculation, which has contributed to the challenges faced in addressing the housing crisis.