The regulation has a significant impact on tenant–landlord relations and the overall functioning of the private rented sector. Different forms of rent regulation—in relation to rent levels, rent increases, security of tenure, etc.—also affect the quality, the social composition and, ultimately, the size of the private rented sector. Together they affect the character of much urban regeneration and renewal. The introduction in Portugal of more flexible rent regimes that aimed to gradually replace open-ended tenancies with freely negotiated contracts led researchers to classify the country as a free market system.info:eu-repo/semantics/publishedVersio

Alves, Sónia

Azevedo, Alda Botelho

Mendes, Luís

Silva, Katielle

English

Universidade de Lisboa: Repositório.UL

Rent Regulation in PortugalSubjects: Urban StudiesContributor: Sónia Alves, Alda Botelho Azevedo, Luís Mendes, Katielle SilvaThe regulation has a significant impact on tenant–landlord relations and the overall functioning of the private rentedsector. Different forms of rent regulation—in relation to rent levels, rent increases, security of tenure, etc.—also affect thequality, the social composition and, ultimately, the size of the private rented sector. Together they affect the character ofmuch urban regeneration and renewal. The introduction in Portugal of more flexible rent regimes that aimed to graduallyreplace open-ended tenancies with freely negotiated contracts led researchers to classify the country as a free marketsystem. Keywords: private rental sector ; rent regulation ; housing markets ; urban regeneration1. IntroductionThere is a vast body of literature that compares different types of—and rationales for–government rent regulation andexamines its (long-lasting) effects upon markets . The body of literature that has observed that rent regulation, whichhas been described as “rent policy in which rents are controlled below theoretical market levels”  (p. 46), is linked toother regulation that affects tenant—landlord relations, such as that which deals with tenant security and contractduration. A basic distinction can be made between fixed or definitive contracts versus open-ended contracts .There is also regulation, which is typically formalised within legislative frameworks, concerning the circumstances orevents that justify the termination of a lease, and the efficacy of enforcement mechanisms (inside or outside the legalsystem) for dispute resolution. For example, when tenants breach the terms of the contract, such as in cases of persistentdelayed rent payments or property damage.The comparison of regulatory environments across countries and over time has enabled the identification of differentregimes of rent regulation, from the point of view of how rigidly they regulate rent increases and/or set initial rents, or howthey have (or have not) been associated with other forms of social or economic support, such as exemptions fromlandlord fees, or tenants’ housing allowances .Studies have also shown the importance of correctly calibrating rent regulation and tenancy security. On the one hand,there is evidence that overly strict rent regulations can protect tenants from rent increases, but not necessarily from poorhousing conditions. As they limit profitability for private rental landlords, they tend to discourage building improvement andmaintenance  as well as further investments in the sector, thus limiting housing supply. Overly strict rent price protectioncan also have other negative consequences for the housing market, such as the growth of informal markets, andmismatches between dwellings size and family needs, with small households occupying large dwellings, and largehouseholds unable to find larger dwellings that satisfy their need . On the other hand, there is also evidence fromGermany and Switzerland that rent controls can be compatible with the development of a rental market that protecttenants from eviction and excessive rent increases, and that allows landlords to make enough profit . Whitehead et al. note that strong tenancy protection is a precondition for long-term demand for rental dwellings, as lower tenant securitypushes more consumers towards the owner-occupied secure. Whitehead and Williams  also note the relevance of pathdependency (the influence of past events on the present and future) and that sudden large changes in policy can take along time to take full effect.2. Rent Regulation: A Key Housing Policy InstrumentRent regulation is a housing policy instrument that aims to keep rents below a theoretical market level. It can be describedas a restrictive government policy, although, as Clarke and Oxley  point out, it has been associated with otherinstruments, such as subsidies (in different forms) that seek to expand housing supply, improve affordability, satisfy certainquality standards and assure security and access for households in poverty. For example, rent regulation has been linkedto housing allowances that are subsidies tied to housing which are paid to consumers or directly to landlords or mortgage[1][2][3][4][5][6][7][8] [9][10][11]lenders on the consumers’ behalf. In several countries (such as the UK or Denmark) low-income households in the PRSare entitled to housing benefits. Scanlon  stipulates that government housing subsidies covers around 35% ofhouseholds in the PRS.Rent regulations, which are formulated and implemented in the context of specific power relations, are guided by differentideals and objectives, (such as those of market efficiency and social protection, a mix of these) and have a significantimpact on the overall operation of the PRS . This is important for several complementary reasons. On the one hand,private rental has traditionally been an important type of tenure for low-income families , thus errors in the sector’sregulation can have major consequences, not only for more vulnerable families, but also for levels of cohesion, which arelinked to socio-spatial segregation processes. On the other hand, the PRS has been a destination for global real estateinvestment in search of greater profitability , which has led to the proliferation of second homes, that are linked toseasonal uses and short-term rentals and had facilitated by the co-existence of two urban phenomena: overheatedhousing markets and major ‘rent gaps’ centred and dependent on the dynamics of tourism development.Urban regeneration has been a priority in neighbourhoods where a decades-long absence of public and privateinvestment has contributed to their general degradation and the dilapidation of buildings. Regeneration projects attempt toimprove the image of these places in order to attract new inward investment in social, economic and green infrastructure,as well as middle-high income people to these neighbourhoods. Urban regeneration involves a series of environmental,economic, social and cultural improvements that generally increase land and real estate values, resulting inadvertently indisplacement, gentrification, decreasing liveability and an increasing need for affordable housing .Urban rehabilitation, meanwhile, is a more specific process of urban transformation. It too is prompted by the degradationof urban buildings, but is limited to the conservation, recovery and retrofitting of buildings and urban spaces to provide—as in urban regeneration—better living conditions for their inhabitants, while maintaining the basic structural scheme andthe original exterior appearance of buildings and urban spaces. Although urban rehabilitation can range from simpler tomore complex interventions, it is never as broad and deep as urban regeneration.A sustainability-oriented urban regeneration approach should be able to connect the stimulation of economic growth andenvironmental enhancement with social and cultural vitality, and seeks to achieve social sustainability at the community orlocal level . Social sustainability depends on how individuals, communities and societies live with each other and setout to achieve the objectives of urban development, taking into account the physical and social limits and potentialities oftheir places and communities. At a more operational level, social sustainability stems from actions in key thematic areas—encompassing the economic, environmental and cultural spheres—which range from capacity building and skillsdevelopment to tackling environmental and spatial inequalities. Thus a social sustainability approach brings togethertraditional social policy areas and principles—such as equity, housing and health; the built environment and heritage; andidentity, sense of place and culture—with emerging issues—such as participation, empowerment and access; socialcapital; social mixing and cohesion; and well-being and quality of life. These are critical areas for the social sustainabilityof local communities and neighbourhoods, and it is of fundamental importance to assess the potential direct and indirectimpact that proposed urban regeneration projects are likely to generate for them, in order to prevent displacement andgentrification in terms of housing and local economic activities and services . These areas have become the focus ofan international interest in social sustainability, a concept that is increasingly being used by governments, public agencies,policy makers, NGOs and corporations to frame decisions about urban development, regeneration and housing, as part ofa burgeoning policy discourse on the sustainability and resilience of cities, and is also associated with the differentimpacts of rent regulation regimes .International comparative analyses have identified different generations of rent regulation. Whilst some authors havedistinguished between a first and a second generation of rent regulation, more recently others have opted to add a thirdideal type. In the first group are Priemus  or Haffner et al.  for whom the first generation of rent regulation(implemented during the First and Second World Wars) consisted of either the application to all rents of nominal rent caps,or the limiting of all yearly rent increases to below the inflation rate. This was a very restrictive instrument or, in Priemus’ words, a sort of emergency-braking system. The second generation of rent regulation, introduced in several countries inthe 1980s, was a gradual relaxation or softening of the previous long-standing hard controls. It allowed rents to increaseannually, by a certain percentage, or by supplementary additional discretionary rises in response to some combination oflandlord cost increases and profitability concerns. Lind  identify two dimensions along which the second generation ofrent regulation may vary: (i) the type of contracts subject to regulation—existing vs. new rental contracts; and (ii) the basisfor rent regulation—cost-based vs. market based. In relation to the former, while some countries have applied regulationto both existing and new contracts, limiting what landlords can charge when letting residential property, in other countriesregulation has been restricted to existing contracts.[12][13][14][15][16][17][18][19][20][21][22][2] [5][2][23]Looking at these differences, Kettunen and Ruonavaara  opted to add a third generation of rent regulation and to applyit to the classification of 33 countries. In their own words: “If both initial rents and rent increases were regulated, it wasclassified as second-generation rent control. If only rent increases were regulated, it was classified as third-generationrent control” (p. 16). Even though they recognized that the range of second- and third-generation rent regulations was notalways clear cut, and that in many countries the former is only applied to some parts of the housing stock (e.g., in largercities or areas of high demand), they were able to distinguish between a second generation of rent controls (applied bothto initial rents for new lettings and rent increases within tenancies) and a third generation of rent controls, which constitutea much lighter form of regulation applied solely within an individual tenancy.The work of Kettunen and Ruonavaara , which likens the typology of four distinct welfare regimes  to the typology ofthree generations of rent regulation, provides a good illustration of the relevance of ‘ideal types’ for building theory andguiding the formation of hypothesis . It also illustrates the importance of testing hypotheses against statistical data,as the authors did for the Nordic countries. More questionable, however, is Kettunen and Ruonavaara’s  decision toexclude from the classification of other countries (such as Portugal) what they designate as “old strict laws” that “are stillapplied to rental contracts dated before the 1990s” (Idem, p. 6). In the end Portugal is classified as a country with a freerent market. An idea that became somehow common in some political and academic debates that over the last decadesgovernments have almost complete liberalized or abolished rent controls in Portugal.References1. Jonkman, A.; Janssen-Jansen, L.; Schilder, F. Rent increase strategies and distributive justice: The socio-spatial effectsof rent control policy in Amsterdam. J. Hous. Built Environ. 2018, 33, 653–673.2. Priemus, H. Rent Policies for Social Housing. In International Encyclopedia of Housing and Home; Smith, S.J., Elsinga,M., Fox O’Mahony, L., Seow Eng, O., Wachter, S., Wood, G., Eds.; Elsevier: Oxford, UK, 2012.3. Kholodilin, K. Long-Term, Multicountry Perspective on Rental Market Regulations. Hous. Policy Debate 2020, 30, 994–1015.4. Kemp, P. Access and affordability: Housing allowances. In International Encyclopedia of Housing and Home; Smith,S.J., Elsinga, M., Fox O’Mahony, L., Seow Eng, O., Wachter, S., Wood, G., Eds.; Elsevier: Oxford, UK, 2012; pp. 40–45.5. Haffner, M.; Elsinga, M.; Hoekstra, J. Access and Affordability: Rent Regulation. In International Encyclopedia ofHousing and Home; Elsevier: San Diego, CA, USA, 2012; pp. 40–45.6. Instituto Nacional de Estatística. O Parque Habitacional e a sua Reabilitação-Análise e Evolução 2001–2011; InstitutoNacional de Estatística: Lisboa, Portugal, 2013.7. Garha, N.S.; Azevedo, A.B. Population and Housing (Mis)match in Lisbon, 1981–2018. A Challenge for an AgingSociety. Soc. Sci. 2021, 10, 102.8. Gilbert, A. Rental housing: The international experience. Habitat International 2016, 54, 173–181.9. Whitehead, C.M.; Scanlon, K.; Monk, S.; Tang, C.; Haffner, M.; Lunde, J.; Voigtlander, M. Understanding the Role ofPrivate Renting: A Four Country Case Study; University of Cambridge: Cambridge, UK, 2016.10. Whitehead, C.; Williams, P. Assessing the Evidence on Rent Control from an International Perspective; Housing Supply& Rents, Occasional Reports, Regulation & Enforcement Reports; LSE: London, UK, 2018.11. Clarke, A.; Oxley, M. Using Incentives to Improve the Private Rented Sector: Three Costed Solutions; Joseph RowntreeFoundation: York, UK, 2018.12. Scanlon, K. Private Renting in Other Countries. In Towards a Sustainable Private Rented Sector; Scanlon, K., London,L.S.E., Eds.; London School of Economics and Political Science: London, UK, 2011.13. Azevedo, A.B.; López-Colás, J.; Módenes, J.A. Recent increase of tenancy in young Spanish couples:Sociodemographic factors and regional market dynamics. J. Hous. Built Environ. 2019, 34, 1043–1063.14. Kemp, P. 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Glasson, J.; Wood, G. Urban regeneration and impact assessment for social sustainability. Impact Assess. Proj.Apprais. 2009, 27, 283–290.21. Kohon, J. Social inclusion in the sustainable neighborhood? Idealism of urban social sustainability theory complicatedby realities of community planning practice. City Cult. Soc. 2018, 15, 14–22.22. Woodcraft, S. Understanding and measuring social sustainability. J. Urban Regen. Renew. 2015, 8, 133–144.23. Lind, H. Rent regulation: A conceptual and comparative analysis. Eur. J. Hous. Policy 2001, 1, 41–57.24. Kettunen, H.; Ruonavaara, H. Rent regulation in 21st century Europe. Comparative perspectives. Hous. Stud. 2021,36, 1446–1468.25. Esping-Andersen, G. The Three Worlds of Welfare Capitalism. Cambridge and Princeton; Polity Press and PrincetonUniversity Press: Princeton, NJ, USA, 1990.26. Bruun, H.H. Science, Values and Politics in Max Weber’s Methodology; Taylor & Francis Group: Abingdon, UK, 2007.27. Alves, S.; Burgess, G. Planning policies and affordable housing: A cross-comparative analysis of Portugal, England andDenmark. In Proceedings of the International Conference on the Global Dynamics of Social Policy, University ofBremen, Bremen, Germany, 25–26 October 2018.Retrieved from https://encyclopedia.pub/entry/history/show/119646

Rent Regulation in Portugal

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Rent Regulation in Portugal

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