Key figures — as of 2026-08-01: 2% cap on new-contract rent increases repealed three years ahead of its scheduled 2029 expiry — reform approved by the Council of Ministers on 9 July 2026 — existing tenants remain protected by the 2026 INE rent-update coefficient of 2.24% — advance rent cap raised from two to three months and the security-deposit ceiling scrapped entirely.
What actually changed
Portugal's government has removed the 2% cap on rent increases for new tenancy agreements, bringing this change forward by three years compared to the previously set deadline of 2029. The rule dates back to the Socialist-era Mais Habitação package, and it had been introduced to prevent sharp rent rises, with the intention of discouraging landlords from terminating existing contracts in order to sign new ones at higher prices. Under that regime, a landlord re-letting a property that had been rented out in the previous five years could raise the rent by no more than 2% over the last figure charged.
That constraint is now gone. As The Portugal News reported, this rule, introduced by the previous Socialist administration and originally set to remain in effect until 2029, is being eliminated three years early, thereby restoring the parties' freedom to mutually agree on market rates. Housing Minister Miguel Pinto Luz framed the wider package around the principles of contractual "balance and freedom" between landlords and tenants, and the stated goal, per Idealista, is to bring more properties onto the market to address the housing crisis.
Two other changes tighten the picture for anyone signing a lease from now on: landlords will be allowed to request three months' advance rent, instead of the current limit of two, and on deposits, there will no longer be a cap on the amount, whereas until now they could not exceed the equivalent of two months' rent. On the enforcement side, the government wants to lift the rent cap and speed up evictions after two months' arrears.
Why renewing tenants are shielded (for now)
If you already hold a lease, none of this touches your annual increase. Existing contracts are still governed by the statutory update coefficient, and for 2026 that figure, as calculated by the National Statistics Institute ("INE"), is set at 1.0224, reflecting a 2.24% increase. So a sitting tenant paying €1,200 a month faces a legal ceiling of roughly €27 extra this year. A prospective tenant signing a brand-new lease on a comparable flat faces no such ceiling at all — the landlord can simply ask what the local market will bear.
GrowIN's calculation: the new-vs-renew gap
Here's the number that matters for anyone flat-hunting rather than renewing. Under the old rule, a landlord re-letting a €1,200/month property could not lawfully ask more than about €1,224 from an incoming tenant — the same 2% ceiling that applied to sitting tenants' updates, roughly. With that cap gone, the only limit is what the market supports. Given that Portuguese rents have already climbed steeply over recent years in high-demand cities, a landlord repricing that same unit to current asking levels could plausibly seek €1,800–€2,000 or more in Lisbon, Porto or the Algarve coast — a gap of several hundred euros a month between what a renewing tenant pays under the 2.24% coefficient and what a new tenant is quoted for an identical address. This is GrowIN Portugal Editorial's own illustrative estimate based on the mechanics of the reform, not a guaranteed outcome — actual figures depend heavily on location, property condition and how tight local supply is.
"For foreigners hunting for a lease this autumn, the difference between renewing and relocating just got a lot more expensive." — GrowIN Portugal Editorial
What's still pending
This isn't fully locked in yet. The changes were approved by the Council of Ministers on 9 July 2026 and will proceed to parliament for final approval; until they are officially published in the Diário da República, the strict caps from the 2023 Mais Habitação package remain fully in force. Foreigners currently negotiating a lease should ask landlords directly which regime applies to their specific contract date, and get any agreed figure in writing.
Practical implications for foreign tenants
If you're relocating to Portugal and about to sign your first lease, budget for market-rate rents rather than assuming the modest annual caps you may have read about elsewhere apply to you — they don't; those caps protect existing tenants on renewal, not newcomers signing fresh paper. Register any new tenancy correctly and keep documentation, since Finanças requires landlords to file the lease within 30 days. If you're weighing whether to lock in a longer initial term to avoid repeat market repricing, or comparing this against buying instead, our relocation hub walks through the wider cost trade-offs of settling in Portugal.
Whichever side of the cap you land on, the direction of travel is clear: Portugal wants more rental stock on the market, and it's betting that freeing up prices on new contracts — while eviction rules tighten and advance-payment terms shift toward landlords — is the way to get there.