“There were very violent policies against landlords over eight years”, but the “reversal” is coming. What will change in local accommodation

Giving more power to local authorities, more attention to regions and the end of taxes are some of the measures expected for the Local Accommodation sector

The Government is preparing to announce changes to local accommodation (AL). After the Minister of Infrastructure and Housing assumed that he will reverse, in the coming weeks, part of the previous executive’s measures, opening the door to the end of the extraordinary contribution (CEAL) – a tax that applies a fixed rate of 15% to apartments in AL – and with licenses expiring in five years, expectations in the sector are high.

“There have been very violent policies against landlords over the course of eight years”, says Diana Ralha, director of the Lisbon Owners Association, admitting that the sector is waiting for the end of “a deeply ideological tax”, wishing that the government would stop looking at the landlords as “a caricature”

Local accommodation associations guarantee that the measures currently in force have left many business owners “with a rope around their throat” and admit that the new package of measures to be launched by the new Government could be a breath of fresh air for the sector. “On our part there is a legitimate expectation, the old package was a real attack on the sector”, emphasizes Eduardo Miranda, president of the Local Accommodation Association in Portugal (ALEP), recalls that AL played an important role: it helped to “rejuvenate Portuguese cities”.

Under fire is the legislative package from the Government of António Costa, known as Mais Habitação. The document introduced measures for the AL such as the extraordinary contribution for local accommodation (CEAL), expiry limits for licenses and gave condominiums the power to authorize new licenses or withdraw existing exploration licenses. These are some of the rules that associations representing the sector believe will be changed.

“Our expectation is that the Government will immediately revert to CEAL with retroactive effect. Furthermore, mechanisms such as non-transferability and expiry of licenses must end. It is something never seen in a modern, capitalist society like ours. It doesn’t make any sense”, argues David Almeida, president of the Porto and North Local Accommodation Association (ALPN).

15% fee

CEAL is an extraordinary tax that applies a flat rate of 15% to apartments dedicated to the operation of local accommodation or accommodation establishments that operate in apartments. The flat rate applies to a tax base based on economic and urban pressure coefficients. This extraordinary contribution does not apply to self-owned apartments that are operated as local accommodation for a maximum of 120 days.

“CEAL is so penalizing that it can jeopardize the very existence of a company”, guarantees Eduardo Miranda, from ALEP, who highlights that he has already had the opportunity to meet with housing and tourism representatives to expose the problems faced by the sector .

The Democratic Alliance program itself appears sensitive to the position of investors. In the document, the coalition led by Luís Montenegro defended the end of “disregard for the protection of investor confidence” and promised to “immediately eliminate” this extraordinary contribution. However, it does not specify whether it will restore the money charged retroactively, as businesspeople demand.

Owners also complain about the tax increase in the Municipal Property Tax (IMI) advanced in Mais Habitação, for AL in areas where it is difficult to find housing. For the president of ALPN, it is necessary to reverse the measure that “substantially worsened” the fiscal burden of these properties. “Local accommodation is not to blame for the lack of housing, it should not be treated as such”, he argues.

Expiry of registration

Among the priorities for entrepreneurs in this sector are the expiry and non-transferability of the AL registration. The measure introduced by the then socialist Housing Minister Marina Gonçalves established a maximum duration of five years for local accommodation licenses, requiring them to be re-evaluated at the end of that period. The non-transferability of licenses makes it impossible to acquire transmission registration. Businesspeople say that this measure “is something never seen” in a “modern and capitalist” society.

“Unfortunately, Mais Habitação was a blind attack on several fronts for the sector. Just like the CEAL, which is so penalizing that it can jeopardize the very existence of a company, the non-transferability of the license means that a company that sells 1% of its shares will have its business completely destroyed”, guarantees Eduardo Miranda.

Proof of activity

The laws approved in the socialist executive package oblige registration holders to prove that they maintain activity, otherwise they are subject to the cancellation of their registrations. Although this measure does not apply to properties that are owned housing and have been in operation for less than 120 days, the number of people who did not provide the data is quite high.

According to data obtained by ALPN, of the 120,714 local accommodation registered in Portugal, only 80,528 presented declarations of activity. In other words, only 67% of registration holders submitted the necessary documents on time. Guarda, Portalegre and Vila Real are the districts with the highest percentage of non-compliance. When proof is not provided, the decision on canceling licenses passes into the hands of local authorities.

“There are many people at risk of closing their activities, especially in the interior of the country. There were many people who did not provide proof of activity, some due to lack of information, others because they were unable to obtain the data in a timely manner. There are a lot of people on the ropes, not knowing what will happen to them”, insists David Almeida.

Local power

As far as new licenses are concerned, signs of change are in sight. On the one hand, the Government program addresses the repeal of “disproportionate legal limitations imposed by the socialist Government” within the scope of Local Accommodation. On the other hand, minister Miguel Pinto Luz, who was present at the CNN Portugal Summit that took place last Thursday, explained that he wants to “reverse” some of the measures in the More Housing package to give “predictability” to investors and more power to local authorities to that the law does not treat “that which is different” equally.

“40% of AL in Portugal is in the Algarve. Algarve investors were exactly looking for a certain product. There are entire projects that were designed just for AL. Objectively, we cannot treat things that are different equally. That was the problem with the previous law”, said the minister.

Those responsible for industry associations agree. “It is the mayors who best know the region and the market’s needs. It seems fair to us. Local accommodation in the Algarve is different from that in Lisbon or inland regions. Seasonal factors mean that these regions have to be treated differently”, argues the president of ALPN.

Condominiums

Among local accommodation entrepreneurs, however, there is still “great uncertainty” regarding the future of a measure from the Mais Habitação package that concerns the intervention of the condominium. One of the rules presented by the then Minister of Housing provided that the approval of new licenses for the exploitation of AL in residential buildings would require unanimous authorization from the condominium, to change the use for which the building was intended. At the same time, Mais Habitação gave condominium owners the possibility of terminating the license of an AL already existing in the building, if a two-thirds majority was achieved in the condominium.

“The socialist executive, not having the courage to ban the AL, placed the burden on the condominiums. There is a ray of hope here, that very serious policies can be reversed”, considers Diana Ralha, from the Lisbon Owners Association, noting that “local accommodation is a tiny portion of housing, it is insignificant when we look at the housing market”,

The expectation of businesspeople is that there will be a return to “the old law” of 2018, which created a simplified mechanism in which the condominium could make a request to cancel the operation of the AL. For Eduardo Miranda, it is important to “find a common sense balance” that brings stability to the sector. “That’s what we want, stability and balance solutions.”