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Portugal suspends rents, worries surface over post-pandemic housing crisis

LISBON (Reuters) - Portugal’s parliament approved on Thursday the suspension of rents for vulnerable households and cash-strapped small firms during the coronavirus outbreak, but rights groups warned that the measure might only delay a looming housing crisis.

FILE PHOTO: Comercio square is pictured during partial lockdown as part of state of emergency to combat the coronavirus disease (COVID-19) outbreak in Lisbon, Portugal, March 30, 2020. REUTERS/Rafael Marchante/File Photo

The measure suspends rents until a month after the state of emergency ends. After that, renters are expected to repay what they owe in monthly installments for up to a year.

Those eligible include people whose household income fell 20% or more from the previous month or the same period last year, or who put at least 35% of their income toward rent.

The state of emergency was declared on March 18 and extended on Thursday by 15 days. It was not clear how much longer it will last, but Prime Minister Antonio Costa said on Wednesday restrictive measures could be in place for months as the country approaches an expected plateau of coronavirus cases at the end of May.

Activists deemed the measure “insufficient”. Though rental prices may fall after the outbreak as demand for holiday lets dissipates, housing groups argue incomes are unlikely to recover fast enough for people to repay the debt.

“The loss of income because of the pandemic is hitting families already in very bad shape,” Stop Despejos and Habita, two of the biggest housing groups in the country, said in a joint statement.

“When the state of emergency ends people will face an economic crisis,” they said. “How will those who are unemployed start to pay rent again?”

Rents have skyrocketed in Portugal in recent years due to the rise of holiday apartments and controversial schemes such as the “golden visa” - granting residence to non-EU property buyers - while salaries remained almost unchanged.

A quarter of the population is on the lowest minimum wage in Western Europe of just 635 euros a month, with household savings at approximately 4.9%, according to Eurostat - one of the lowest rates in Europe.

Last week the government and central bank predicted a recession and a rise in unemployment in 2020 as the pandemic causes a slump in private consumption, investment and exports.

A group of lawyers providing free legal advice to people affected by the crisis fears a wave of evictions once the government lifts the rent suspension and landlords start demanding reimbursements.

“This pandemic crisis puts people’s right to work and housing at risk. We expect a housing crisis,” said Vasco Barata, from the Plataforma Solidaria group. “That’s what worries us.”

Reporting by Victoria Waldersee, Catarina Demony, editing by Andrei Khalip