Portugal rent cap: most landlords get tax cut without lowering prices

Portugal rent cap: new data shows 75% of rental properties in Lisbon and Porto are already below the €2,300 limit, meaning most landlords benefit from the IRS tax cut without needing to reduce rents.

75% of rental properties in Lisbon and Porto are already below the new €2,300 limit, meaning most landlords benefit from the IRS tax cut without needing to reduce rents.

The Portuguese government’s new “moderate rent” policy offers a major tax break to landlords, but data suggests the move will not lower prices for most renters. The tax cut applies to properties rented for less than €2,300 per month, a threshold the Minister of Housing claimed was rarely met in Lisbon. However, a market check shows the vast majority of available rentals in both Lisbon and Porto are already priced below this limit.

The new tax break and the minister’s claim

The new housing package introduced a significant incentive for landlords: a reduction in the IRS (Imposto sobre o Rendimento das Pessoas Singulares) tax rate on rental income. Landlords who rent properties at or below the new “moderate rent” threshold of €2,300 per month will see their tax rate drop sharply, from 25% down to 10%.

The Minister of Infrastructure and Housing, Miguel Pinto Luz, recently suggested that finding properties below this €2,300 ceiling in Lisbon was difficult. He stated that anyone checking rental sites would see that rents in the capital were “superior” to this limit in many cases.

This claim set off an immediate market check. If the minister was right, the tax cut would incentivize high-end landlords to drop their prices slightly to qualify for the 10% rate, potentially bringing relief to the top end of the market. If he was wrong, the tax cut would simply be a windfall for landlords already charging market rates, with no pressure to lower prices.

What the market data shows

A review of the most popular rental portal in Portugal, Idealista, revealed a different picture than the one painted by the minister.

At the time of the analysis, there were 5,870 houses available for rent in the municipality of Lisbon. Of these, 3,933 were listed for a monthly value of €2,300 or less. This means 67% of the houses available for rent in Lisbon are already below the government’s “moderate rent” cap.

Breaking down the types of properties (tipologias) below the cap:

  • T1 (one-bedroom): 1,564 houses
  • T2 (two-bedroom): 1,411 houses
  • T3 (three-bedroom): 429 houses
  • T4 or larger: 97 houses

The bulk of the market, nearly half of all available properties (47.3%), is priced between €1,200 and €2,000. Only 1,937 properties (about one-third of the total) were listed above the €2,300 threshold.

Porto’s market is even more affected

The situation is even more pronounced in Porto, the other major city the government considered when setting the moderate rent concept.

In Porto, 3,183 properties were available for rent. A staggering 89% of these properties (2,839 houses) were listed at or below €2,300.

Only 344 houses, or about 10% of the Porto market, were priced above the new moderate rent limit.

Combining both cities, the data shows that 74.8% of all available rental properties (6,772 out of 9,053) are already priced below the €2,300 limit.

Why the tax cut won’t lower most rents

The core issue is the incentive structure.

For a landlord currently charging, say, €2,350 in Lisbon, the new law provides a clear incentive to drop the rent slightly to €2,300. By doing so, they qualify for the massive tax reduction (from 25% to 10% on their rental income), which likely outweighs the €50 loss in monthly rent. This might bring down prices at the very top end of the market.

However, the vast majority of landlords—the 75% already charging less than €2,300—have no incentive to lower their prices further. They already qualify for the 10% tax rate simply by maintaining their current rent.

In fact, the policy creates a new ceiling. A landlord currently charging €1,500 could potentially raise the rent to €2,299 and still qualify for the 10% tax rate. The new law effectively gives these landlords a significant tax break without requiring them to offer any benefit to the tenant.

The result is that the vast majority of landlords will receive a substantial tax relief on their rental income (arrendamento) without any corresponding pressure to reduce the prices paid by tenants.

What this means for ordinary people

For renters, especially those seeking T1 or T2 apartments in Lisbon and Porto, this policy is unlikely to translate into lower monthly costs. The market is already tight, and the new tax break does not increase supply or reduce demand.

Instead, the policy acts as a major subsidy for existing landlords. While the government aims to stabilize the market, critics argue that setting the “moderate rent” cap so high—at a level already below 75% of the market—misses the mark.

The real pain point for most residents is not the luxury segment above €2,300, but the rapid increase in rents for basic T1 and T2 apartments, many of which are now clustered around the €1,200 to €2,000 range. The new law provides no relief for these renters.

The risk of rent creep

The most immediate risk for tenants is that the €2,300 cap becomes a new target. Landlords who were previously charging below this amount may now feel comfortable raising their prices closer to the limit, knowing they still benefit from the 10% IRS rate.

If you are a tenant facing a lease renewal (contrato de arrendamento), be aware that your landlord now has a strong financial incentive to maximize the rent up to the €2,300 limit while still benefiting from the tax cut.

The tax relief applies to rental income declared through the Finanças portal. Landlords must ensure their contracts are properly registered and declared to benefit from the reduced rate.

How to protect yourself

If you are renting or planning to rent in Portugal, understand that the new policy is primarily a tax measure for property owners, not a direct rent control mechanism for the majority of the market.

  1. Check the Contract: Ensure your rental contract is officially registered with Finanças. This is crucial for your own legal protection and for the landlord to qualify for the tax benefit.
  2. Know the Market: Use portals like Idealista to understand the true market rate for your area and property type (T1, T2, etc.). Do not assume the new law will automatically lower prices.
  3. Negotiate Renewals: When renewing your lease, use the current market data, not the government’s high cap, as your negotiation baseline.

The government’s goal was to define a “moderate rent” that would encourage more long-term rentals and stabilize prices. However, by setting the threshold so high, the policy primarily benefits existing landlords with a substantial tax cut (alívio no IRS) while leaving the core housing affordability crisis largely untouched.

Bottom Line / Key Takeaway

The new portugal rent cap of €2,300 is set too high to force a widespread reduction in rental prices; 75% of landlords in Lisbon and Porto already qualify for the reduced 10% IRS tax rate on rental income. This policy acts as a major tax subsidy for property owners without providing immediate relief or lower rents for the majority of tenants. Check your rental contract compliance before your next tax filing to ensure you are protected.

Source:

Falardo, P. (2025, September 29).75% das casas para arrendar em Lisboa+Porto estão abaixo de 2300€. Trata-se de senhorios que vão ter alívio no IRS sem necessidade de baixar os preços. CNN Portugal.

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