Portugal's government approved reforms to its urban rental system at a Council of Ministers meeting on 9 July 2026. The changes are designed to encourage landlords to enter the rental market and increase the supply of available homes, responding to a housing crisis where average rent payments are reportedly 82% of incomes.
The new measures focus on negotiating agreements and responding to breaches of contract. Under the proposed changes, a rental contract could be terminated after two months of rent arrears, reduced from the current three months. Delays of more than eight days could also justify termination if they occur more than three times over 12 months, or more than four times over 18 months.
Landlords will also gain greater freedom to set initial rents for new agreements, as a previous restriction limiting increases to 2% above the last rent charged is set to be removed. Additionally, future contracts could allow for up to three months' rent to be paid in advance, up from two, and remove the current cap on security deposits.
The proposal also allows landlords to oppose the first automatic renewal of an agreement once the initial term ends, provided they give the legally required notice. This change aims to align the rules for landlords and tenants, as under the current system, opposition to the first renewal only takes effect three years after the contract was signed.
Alongside these reforms, a decree-law has been approved to create a Housing Emergency Fund. This fund is intended to provide non-repayable financial support to individuals and households who lose their home due to financial hardship or other vulnerable circumstances.