Key figures — as of 2026-08-11: Rent-increase cap on new tenancy contracts scrapped three years ahead of schedule, effective from Council of Ministers approval on 9 July 2026 — landlords can now start lease termination after two months of unpaid rent (down from three) — pre-1990 contracts transition to market rules once household income tops €64,400/year, moving to 1/15 of the property's taxable value — moderate-rent landlords (up to €2,300/month) keep an AIMI waiver and a cut IRS/IRC rate of 10% instead of 25%.
The Number That Matters: Two Months, Not Three
Foreign landlords letting out Lisbon or Porto flats just got a faster route to reclaiming a property from a non-paying tenant — and foreign tenants signing new leases lost a safety net that has kept rent rises predictable since 2023. On 9 July 2026 the Council of Ministers approved a profound reform of Portugal's rental market rules, under the banner of restoring "autonomy, trust and social responsibility" between landlords and tenants, while also accelerating evictions for non-payment to two months and creating a Housing Emergency Fund for vulnerable families. The package, part of the government's wider Construir Portugal housing strategy, now goes to the Assembleia da República, where it must be debated and voted before it becomes law — and where opposition parties have already signalled they'll push amendments.
What Actually Changes for New Contracts
The headline change is the early death of the 2% rent-increase cap. The removal of the 2% cap on rent increases for new tenancy agreements brings this change forward by three years compared to the previously set deadline of 2029. In practice, a landlord signing a new lease on a property that was rented within the last five years no longer has to cap the uplift — rent becomes a matter of negotiation, not formula.
Deposits and advance payments get looser too. Landlords will be able to demand up to three months' rent in advance instead of two, and security deposits no longer have a legal maximum. Lease renewals also shift in the landlord's favour: automatic renewal of contracts can now be refused by the landlord with prior notice, while the minimum one-year and maximum 30-year contract duration remain unchanged.
Faster Evictions — But With a Longer Decision Window
The eviction mechanics are genuinely two-part, and easy to conflate. First, the trigger point drops: if tenants accumulate two months of unpaid rent, the landlord can initiate contract termination proceedings — down from three months under the outgoing rules. Second, once that threshold is reached, landlords actually get more time to decide whether to act. If approved by Parliament, owners will be able to exercise this right for six months after rent falls into arrears, compared with the shorter three-month window under the previous "Mais Habitação" regime. The government has also folded post-judgment steps together: the decree simplifies the procedure after a court ruling by removing unnecessary formalities and combining property repossession and rent-arrears recovery into a single process, aimed at cutting bureaucracy once a judge has ruled.
Pre-1990 Contracts: Still Protected, But a Real Income Cliff-Edge
For foreigners who've inherited or bought into older Lisbon or Porto buildings with sitting tenants on historic rents, the reform sets a clear, income-tested transition. For tenants under 65 with annual household income below €64,400, the rent stays frozen for a further five years; above that threshold, it can be updated to 1/15 of the property's Valor Patrimonial Tributário (VPT); tenants aged 65 or over do not transition to the new regime at all unless that same income ceiling is exceeded. It's a hard line: cross €64,400 in household income and the maths on your rent changes overnight, regardless of how long you've lived there.
GrowIN's Take: The Real Cost of Chasing the €2,300 Tax Break
Here's the trade-off foreign landlords should actually run the numbers on. Portugal's moderate-rent regime — capped at €2,300/month — carries two tax perks: the AIMI property surcharge is waived on homes rented out up to €2,300, and income tax on landlords charging moderate rents drops from 25% to 10%. GrowIN's calculation: a landlord earning the maximum €2,300/month (€27,600/year) in rental income pays roughly €2,760 in tax at the 10% moderate-rent rate versus about €6,900 at the standard 25% rate — a difference of €4,140 a year. Push the rent to, say, €2,500 to chase the newly-uncapped market and you not only lose that tax discount, you also forfeit the AIMI waiver. For many landlords, staying just under the ceiling will be worth more than the extra €200 a month.
"The cap disappearing doesn't mean rents float free of consequences — it just moves the ceiling from the law to the tax code," notes GrowIN Portugal Editorial.
What to Watch Next
The bill's fate now rests with Parliament, where the housing debate has already split along familiar lines — right-leaning parties favour tax relief and deregulation to unlock supply, while left-leaning parties push for price controls and direct tenant protection, with amendments a real possibility before any final vote. Foreign owners with tenants in arrears, and newcomers negotiating leases in Lisbon, Porto or the Algarve, should treat the Council of Ministers text as a draft, not settled law, until it clears the Assembleia da República. For background on buying, letting or otherwise navigating Portuguese property rules as a non-resident, see our /property/ hub — and for tailored guidance on a specific tenancy or eviction situation, professional legal advice is strongly recommended before acting on any of these provisions.
Parliament's timetable for a final vote hasn't been confirmed; GrowIN will update this article once a debate date and any amendments are published.