Urbanistica Informazioni

Portuguese Planning System and Housing – State of the Art

Scritto da J. B. Correia.

João Belard Correia – UI n. 319 – gennaio-febbraio 2025 (ECTP-CEU)     

Scarica l’articolo in formato PDF.

*) João Belard Correia is Vice president of APU (Portuguese Association of Urban Planners) and delegate to the ECTP-CEU

Introduction and Portugal in a nutshell

Portugal, despite its relatively small size compared to other European countries, exhibits significant territorial diversity and contrasting patterns of land occupation. A defining characteristic of its spatial distribution is the high concentration of population along the coast, particularly in the metropolitan axis between Setúbal and Braga, as well as in parts of the Algarve.

In 2021, approximately 20.1% of the national population resided in just seven municipalities, which together accounted for only 1.1% of the country’s total land area. This data underscores the pronounced asymmetry in population density, with a stark contrast between densely populated urban centers and sparsely inhabited inland regions. Figure 1 illustrates the distribution of population by municipality in mainland Portugal.

Figure 1 – Population by municipality in continental Portugal. Source – INE/Terraforma

Portugal's population has undergone significant changes over the past century and a half. In 1864, the country had just over 4 million inhabitants, a number that grew to approximately 6 million by 1920. By 1960, the population had reached 8.8 million, followed by a brief decline in the 1970s. Growth resumed in subsequent decades, peaking at 10.5 million in 2011. However, according to the most recent Census (2021), a slight population decrease was recorded (INE, Census).

Like many other European countries, Portugal is experiencing a pronounced trend of population aging. Long-standing patterns of internal migration accompany this demographic shift. Over the past 150 years, large-scale movements from the country’s interior toward the Metropolitan Areas of Lisbon and Porto have placed substantial pressure on urban housing markets, requiring continuous growth to accommodate new residents.

Until 1965, only the State had the authority to carry out urban land development, with the power to expropriate agricultural and other lands to facilitate city expansion. This centralized approach allowed for planned urban growth, particularly in Lisbon. However, from that year onwards, a legislative shift enabled private developers to propose urban development projects, subject to approval by public authorities. This change aimed to accelerate urbanization in response to the scale of the housing demand and the public sector’s limited capacity to address it effectively.

The 1974 revolution brought democracy to Portugal, leading to the adoption of a new constitution in 1976. For the first time, the right to housing was recognized as a fundamental right. In 1982, a legislative framework for the preparation of Municipal Master Plans (Planos Diretores Municipais – PDMs) was introduced. However, it was not until 1990 that a comprehensive legal framework for municipal territorial planning was established, mandating that municipalities have an approved PDM. Compliance became particularly crucial, as access to European funding was contingent upon the existence of an approved plan.

Despite this legal requirement, by 2015, a significant number of municipalities were still operating under PDMs that were over 30 years old, shaping their territorial organization based on outdated frameworks. Figure 2 illustrates this continued reliance on aging planning instruments.

Figure 2 – Current legal regime of the current PDM in 2025. Source – DGT/Terraforma

The nationwide coverage of PDMs in the 1990s provided a structured framework for territorial planning, guiding urban development and construction across the country. However, in some cases, these plans designated extensive areas for urban expansion, particularly in developable zones. This facilitated the growth of suburban peripheries, often at the expense of the rehabilitation and revitalization of historic city centers.

This expansion of urban and developable areas led to, during the 2007-2010 crisis and in subsequent years, several companies and families were unable to meet credit expenses, resulting in a substantial volume of houses and land being surrendered to banking institutions. This crisis also led to the bankruptcy of various construction companies, resulting in a significant loss of response capacity in this area.

In 1998 and 1999, new legislation defined the foundations of territorial planning and urban policy, establishing the planning system in its entirety and with broader scope. In 2014 and 2015, additional legislation was approved, further consolidating the planning system, with one of the major changes being a stricter definition of urban areas.

In 2019, the Housing Framework Law was approved, enshrining the right to housing as a fundamental right and defining the basis for its implementation. It established the State's obligations in guaranteeing this right, distributing responsibilities among different levels of government (national, regional, and local), and promoting universal access to housing. This law also introduced Municipal Housing Charts, strategic instruments that define municipal housing policies. These charts should be aligned with other planning instruments, such as the Municipal Master Plan, serving as essential tools for planning and implementing housing policies at the local level.

Housing Crisis

The current housing challenges in Portugal share many similarities with those faced by other Western countries. However, the crisis has distinct historical roots and modern dynamics.

In the 1960s, growing urban pressure was further exacerbated by a massive influx of returnees from former colonies after the 1974 revolution, leading to severe housing shortages and the expansion of informal settlements. In response, the state introduced subsidized interest rates to support homeownership. After recovering from an economic downturn, Portugal experienced a significant real estate appreciation cycle starting in 2014, driven by low interest rates, foreign investment, tourism growth, and inflation.

Multiple factors have intensified housing pressure, including the rise of short-term rentals, the attraction of digital nomads and retirees, and immigration for various work sectors. The golden visa program and tourism success have further impacted the market. While these factors don't all affect the same locations simultaneously, their combined effect has significantly increased housing prices.

Portugal faces an accessibility issue rather than a housing shortage. The country has one of Europe's highest housing unit ratios, with 577 units per thousand inhabitants. However, rising prices have pushed many residents away from city centers, increasing commuting costs and travel times—despite the growing adoption of hybrid work arrangements following the COVID-19 pandemic.

The rental market has not developed as a viable alternative, particularly outside the metropolitan areas of Lisbon and Porto, forcing many families toward homeownership. Changing family dynamics have also played a role, with the average household size decreasing from 3.7 people in 1970 to 2.5 in 2021, alongside a threefold increase in single-person households.

However, the rental market remains problematic, largely due to historical policies that have eroded trust between landlords and tenants. Additionally, a significant number of approved housing projects remain unexecuted. Many parishes have vacancy rates exceeding the natural market range (4–7%), highlighting the need for policies to reintegrate these units into the housing market.

Figures 3 and 4 illustrate these trends.

Figure 4 – Proportion of vacant dwellings for other reasons. Source – INE/Terraforma

Figure 3 – Number of vacant dwellings for other reasons. Source – INE/Terraforma

It should be noted that the proportion of vacant properties in metropolitan areas is low, which is not surprising as they are more dynamic markets. However, in absolute terms, they represent a significant number of vacant housing units. Conversely, in municipalities on the periphery of metropolitan areas, there are several parishes where the weight of vacant properties is quite significant.

Private property rights have historically been a sensitive issue in Portugal. The State owns only 2% of the national territory, while approximately 70% of housing occupants are homeowners—up from 49% in 1970. In contrast, only 22% of housing units are available for rent, making access to rental housing increasingly challenging. Housing affordability has also deteriorated, with household effort rates frequently exceeding the recommended threshold of 30% of income. This trend is particularly concerning as family incomes have not kept pace with the rising costs of home purchases and rental prices.

Housing costs have increased across multiple factors, including land prices, construction materials, and labor. The economic and financial viability of projects and operations is a critical consideration, whether in land reclassification or the redevelopment of urban voids. If governments (both current and past) aim to play an active role in addressing the housing challenge, they must implement measures to ensure the financial feasibility of such initiatives. Any Housing solution must simultaneously involve both the public and private sectors.

Portuguese planning system

The Portuguese planning system is flexible and operates on three main hierarchical levels. At the national level, there is the National Program for Territorial Planning Policy (PNPOT), along with sectoral and special programs for specific areas. At the regional level, management is carried out through Regional Territorial Planning Programs (PROT). At the municipal level, the system includes the Urban Development Plans (PU) for specific urban areas, and Detailed Plans (PP) for detailed areas. 

A key feature of this system is its flexibility, allowing more recent smaller-scale plans to modify certain aspects of larger plans. The recent emergence of the Execution Unit serves as an intermediate instrument between the PP and land subdivision operations. The system also mandates public participation and is designed to integrate with broader economic and social development policies, ensuring a more inclusive and coordinated approach to territorial planning.

A persistent challenge in the Portuguese planning system is the shortage of qualified technical staff, both at the municipal level and within central and sectoral entities. The substantial pressure from numerous processes related to the revision and modification of territorial plans and programs has contributed to significant bottlenecks, leading to delays and inefficiencies in urban planning procedures. This issue is exemplified by the considerable number of municipalities that have yet to comply with the new legislation, nearly a decade after its enactment, as illustrated in Figure 5.

Figure 5 – Status of the PDM Review. Source – DGT/Terraforma

For many years, the National Ecological Reserve (REN)[1] and the National Agricultural Reserve (RAN)[2] have been key constraints in the development of PDMs. According to the 2023 National Territory Planning Status Report (DGT), 263 municipalities had RAN, covering about 16% of mainland territory. For the REN, considering 214 municipalities with vector REN, about 29% have more than 50% of their territory covered by REN, with seven municipalities exceeding 80% coverage. Between 2007 and 2018, the artificially developed area of the mainland increased by 5.7%, with an average daily artificialization of 7.2 hectares, while the reverse process (renaturalization) was minimal, occurring at a rate of just 1 hectare per day. By 2018, more than half of mainland municipalities showed a proportion of non-artificialized urban land exceeding 50%.  Recent legislative changes in early 2024 introduced an urban planning simplification package (simplex urbanism) aimed at streamlining urban licensing and planning processes. Later in 2024, amendments expanded this exceptional mechanism, allowing development in certain RAN and REN areas, provided that at least 70% of the housing units complied with predefined maximum market values.

The proposed solution risks being case-specific and undermining existing planning, potentially creating disconnected housing developments and increasing infrastructure costs and urban sprawl. Moreover, the legislation shows significant deficiencies in environmental protection and contradicts European Commission guidelines and Portugal's international commitments on climate change, biodiversity conservation, and desertification prevention.

The decree was not debated with implementing entities or professional associations, leading to public outcry. Most urban planning professionals argue that it is too vague, lacks clear regulatory guidelines, and applies uniformly across all territories, without considering local specificities. The proposal assumes that increasing the supply of urban land will lower housing prices. However, the mere announcement of the measure has already led to a significant rise in rural land prices, counteracting its intended effect. This legislation is part of the Government's broader housing package, which also includes measures such as tax exemptions for young homebuyers (under 35 years old). However, this policy has inadvertently increased market demand pressure, further complicating housing affordability.

APU proposals and conclusion

As stated by the Portuguese Association of Urban Planners, of which the author serves as Vice President, solutions to the current challenges should prioritize enhancing the efficiency, effectiveness, and transparency of the territorial management system. Key areas of focus should include: 

  • Improving governance in urban planning, particularly in the development, revision, and amendment of municipal territorial plans.
  • Better integration of land policy with fiscal policy, introducing incentives for the provision of affordable and controlled-cost housing.
  • Implementing an urgent fiscal increase on vacant urban housing and land that remain unused for economic or social purposes.
  • Resolving conceptual inconsistencies within the National Ecological Reserve (REN)[1] and the National Agricultural Reserve (RAN)[2], while addressing inefficiencies in their delimitation procedures.

Portugal's territorial planning system still faces significant challenges due to complex housing and urban development issues. Key problems include population concentration in coastal areas, depopulation and aging populations in rural areas, vacant properties paradox (where high vacancy rates persist despite widespread housing shortages.), and rising housing costs outpacing income growth. Recent legislative changes introduced by the last government have failed to address these issues effectively, neither resolving the housing crisis nor contributing to better urban planning practices.

References

Notes

  1. Which focuses on protecting natural resources (particularly water and soil) and preserving fundamental ecological processes. It covers coastal protection, hydrological cycle sustainability, and natural risk prevention.
  2. Which protects the most suitable agricultural soils and includes areas with irrigation infrastructure, alluvial and colluvial soils, and highly fertile areas.