Maria Elena Carvalho, a 65-year-old retiree, lives in the same apartment in which she was born, a sprawling, rundown four-bedroom in the center of Lisbon. "This is where I got married, where my mother died, where my children were born," she says. Carvalho pays her landlord only $115 per month, but she lives in fear that her rent may soon rise sharply were she forced to leave, she would have little chance of finding another apartment she could afford in the capital. José Gago da Graça, meanwhile, owns a building across town and rents out most of the 170-sq-m units for $3,900 per month. But until recently one tenant was only paying $105, thanks to the rent-controlled lease he inherited from his father. After a decade in court, Gago da Graça has finally won the right to evict the tenant, but only because he managed to prove that the man had not lived with his father for at least a year, a requirement for anyone who inherits a lease. "The apartment is now in very bad shape," he says. "I'll have to invest a lot of money into it before I can rent it out again."
But in Portugal neither landlords nor tenants blame each other for their woes. The problem, they say, is the country's antiquated tenancy laws laws that, if the International Monetary Fund and the European Union get their way, could soon get a drastic makeover. In exchange for an $11 billion bailout, Portugal has agreed to make sweeping structural changes, and among them is modernizing the country's housing market. Good news for landlords, who have long had their hands tied by century-old rent-control agreements and a lengthy eviction process. But for renters, reform could mean a double tragedy. Not only could they be forced from the homes that have been in their families for generations, but many could then also find themselves unable to afford to live anywhere else.
Portugal's rent-control laws, which date back to the beginning of the republic in 1910, mean landlords often find it simply isn't worth their while to rent out their property, leaving abandoned buildings dotting the country. "The market has been completely warped by rent control," says Luís Menezes Leitão, who heads Portugal's Association of Landlords. "The most beautiful buildings in Lisbon and Porto often have completely symbolic rents. So it's impossible to invest in the city centers." The situation is made even trickier for landlords by the country's slow-paced judicial system evicting someone who doesn't pay their rent can take years. "These two problems not being able to hike rents and not being able to evict tenants has really traumatized landlords," says lawyer Pedro Sarraga-Leal, an expert in housing issues.
The planned reforms, which are set to come into effect in September and which the Prime Minister's office declined to comment on as they are still under discussion should make it much easier for landlords to evict tenants, hike prices and further restrict so-called "old rents," that is, rents that are still frozen. Nearly 430,000 of these old rents still exist, and they make up the majority of the market in Lisbon and Porto. Since 2006, rent-controlled leases can no longer be passed on to grown children and spouses, but landlords who want to get market value for their leases are still left having to wait until people with old rents die or, in the case of companies, hope they go bankrupt. Many landlords argue they can't wait any longer. "We've waited 100 years," says Leitão. "We can't wait another 50 years. It shouldn't be our role to provide social security in this country."
Retiree Carvalho understands her landlord's frustrations but feels the reforms could be a double-edged sword: with her rent as low as it is, her landlord feels no responsibility to the upkeep of her apartment; but if he is allowed to charge what he likes, she could end up homeless. "For years, the water wasn't running in my bathroom sink. I asked my landlord to fix it, he said it wasn't his problem. He told me, 'With the rent you pay, you really think I'm going to fix it?' So I had to fix it myself," she says. "Nowadays, I can't use my toaster because the electrical system will blow up. I don't mind if my rent goes up a little, but it can't double or triple all of a sudden. I would have to leave. And where would I go?"
The Association for Lisbon Tenants agrees. "If the market is entirely liberalized, some people are suddenly going to go from paying $40 to at least $700 [per month]," says Antonio Machado, who serves on the association's board of directors. "Can you imagine? People might start murdering their landlords!"
The government's plans so far don't mention any aid to those whose rents would rise. Machado hopes this will change. "We propose that the government subsidize the hike in rents, that they pay the difference," he says. "Then, over time, they can gradually diminish their aid. Of course, the government will say that they don't have the money right now. And to that we say, yes, you will, because you'll make more money from taxing these higher rents." Greater rental-market flexibility could also mean more mobility, says lawyer Sarraga-Leal, and that, in turn, could help combat Portugal's unemployment problem, since people would be able to relocate to find work.
But all these changes may be easier said than done, at least according to Palmira França, 77, who's both a tenant and a landlord. She pays $550 per month for a large apartment in Lisbon, which she's afraid may soon become too expensive for her. She also owns an old, rundown building on the outskirts of the city, but she barely makes any income from renting out the apartments. One of her tenants is unemployed, and another is a 100-year-old woman who's stopped paying her rent. "What am I going to do? Force her to go to a retirement home? She's promised to hit anyone who tries to take her away with her cane," says França. "I can see both sides, and I really don't have the courage to kick these people out. I don't know how anyone will."