Portugal’s Council of Ministers approved a sweeping rental law reform on 9 July 2026, betting that loosening rules for landlords will pull more long-term rentals onto a market where foreigners already compete hard against locals for scarce leases. For anyone renting in Lisbon, Porto or the Algarve, this is the most consequential housing announcement of the year — even though, crucially, it isn’t law yet.
What was actually approved
The government approved a Proposta de Lei that reforms the urban lease regime, with the aim of reinforcing trust in the market, increasing the supply of homes for rent and promoting more balanced relations between landlords and tenants. Housing Minister Miguel Pinto Luz framed it around four principal axes: greater contractual freedom, reinforced security and compliance with contracts, simplified and accelerated eviction and dispute-resolution mechanisms, and a reinforced social role for the State in protecting the most vulnerable.
Among the headline measures: an end to limitations on rent updates between contracts, more flexible deposit and advance-payment conditions, simplified communications between parties, faster eviction processes and reinforced protection mechanisms for the elderly, people with disabilities and vulnerable households.
The changes that hit tenants directly
The most contested change is the early repeal of the 2% cap on rent increases when a property changes tenants. The key change is the early repeal of the 2% cap that limited rent increases when transitioning to new tenancies — a rule introduced by the previous Socialist administration, originally set to run until 2029, now eliminated three years early to restore the parties’ freedom to agree market rates. For foreigners hunting for a lease right now, that means asking prices on newly listed flats can move to whatever the market will bear, with no statutory ceiling tying them to the previous tenant’s rent.
Evictions move faster too. The reform reduces the non-payment period needed to start eviction proceedings — landlords can now move to terminate the contract after two months of unpaid rent, down from three. Repeated late payment is also penalised more quickly: a landlord can also terminate the contract if a tenant is late paying rent more than three times (rather than four) within twelve months, or more than four times within eighteen months.
Deposits and advance rent — often the first shock for newcomers signing a Portuguese lease — also get freer. Landlords will be able to request three months of rent in advance, with no cap on the deposit amount, compared with the previous limit of two months’ advance rent and a two-month deposit. Landlords also gain an easier path to end automatic renewal, since under the reform they can refuse renewal through simple prior notice, unlike current rules where a landlord’s opposition to the first renewal only takes effect three years after the contract begins. Formal notices — rent updates, non-renewal notices — will also be valid by email or digital platform where both parties have agreed, ending the exclusive requirement for registered post.
Protections that stay in place
Not everything shifts toward landlords. Pre-1990 contracts held by older or more vulnerable tenants keep specific safeguards: tenants with pre-1990 contracts who are over 65 or have a disability rated at 60% or higher keep protection, and their rents can only be updated once household annual income exceeds €64,000. Alongside the lease reform, the government is standing up an Emergency Housing Fund, managed by the Institute for Housing and Urban Rehabilitation (IHRU) and funded by the State Budget, providing support based on the Social Support Index up to a monthly cap of €2,300 for up to six consecutive months.
Public money alongside private incentives
The rental reform doesn’t stand alone. It builds on a March 2026 tax package that already cut VAT to 6% on construction and rehabilitation for owner-occupied or rental housing, reduced IRS and IRC rates on moderate rents up to €2,300 until 2029, and created a new Contratos de Investimento para Arrendamento regime offering benefits for up to 25 years to anyone building, rehabilitating or buying property for long-term rental. On the public side, Portugal has also tapped European financing — an EIB-backed credit line to expand controlled-rent housing stock — signalling that supply-side incentives for owners are meant to run in parallel with direct state investment, not instead of it. The OECD has flagged the same logic in its own review, noting that re-balancing rental regulations to attract more private investment will need to be accompanied by sufficient and well-targeted housing allowances to protect low-income tenants.
Not law yet — and what to watch
None of this is in force. The measure is a Proposta de Lei that must clear the Assembleia da República, survive possible amendments in specialised committee, be signed by the President and published in the Diário da República before taking effect. Until then, current rules — including the 2% cap and three-month eviction threshold — still apply, and landlords or tenants making decisions based on the announcement alone risk getting it wrong.
For foreigners currently searching for a long-term lease, or already signed to one, the practical takeaway is timing. If the reform passes largely as drafted, new contracts signed after it comes into force could carry higher asking rents but also faster resolution of disputes and clearer digital communication rules — details worth raising with a landlord or agent before signing anything. Our relocation hub tracks how these changes affect newcomers securing their first lease, and our services team can help review a tenancy contract before you commit.
Whatever shape the final law takes once it leaves parliament, the direction of travel is clear: Lisbon is betting that a friendlier deal for landlords, backed by public money and tax breaks, is the fastest route to more long-term homes on the market.
Sources
This article was produced with AI assistance and editorial oversight in line with our editorial policy. It is general information, not legal or tax advice.