Summer Trends for Local Accommodation and Hospitality

Opinion piece by Bruno Magalhães published in the Vida Judiciária magazine

When the industrial and Europeanist goals of a seaside country inevitably lead to the sale of overnight stays, sunsets, and pasteis de bacalhau (soft and salty codfish cake) with queijo da serra (mountain cheese) – or abundant tourism – it is essential to keep up with the summer legislative trends on the matter. Even though the average ocean temperature is not much above 19°C, at least in the central region where I usually swim, we have the silly season, new developments in local accommodation, tourists on full-season regime, and other related matters.

In the context of the infertile consolidation of the notorious “Mais Habitação” (the “Package”), it is important to highlight, first and foremost, the robust recovery of the tourism sector after the pandemic, and that, in 2023, Portuguese hotels recorded 68.5 million overnight stays up until September, a significant increase compared to previous years.

We also highlight that, according to data from the INE, by 2023, there were approximately 103,000 local accommodation units and 5,000 registered hotel establishments in Portugal.

I tend to agree – on penalizing or limiting demand (ending real estate golden visas and the non-habitual resident regime, as well as restricting local accommodation), while falling short in designing structural measures aimed at significantly reducing construction costs (focusing on increasing supply), and incentivizing new housing construction, which has been declining over the past 30 years.

The Jornal Económico recently reported that the number of buildings licensed for new housing construction in the family housing segment dropped by 15.6% in the first quarter of 2024 compared to the same period the previous year.

Assuming that the reduction in permits does not, ironically, stem from the fact that several operations are now exempt from licensing, we observe that the SIMPLEX, in force since January (albeit at varying speeds), has immediately failed in one of its main objectives. Firstly, due to conjunctural factors – political uncertainty about what was to come, with early elections last March – but also, I believe, and subject to confirmation with second-quarter data, due to legal uncertainties arising from the decree itself. Let’s wait and see.

After the Package, not necessarily the sunshine, but “Building Portugal.” A set of 30 measures announced by the new government in May, some specifically focused on altering/rectifying the PS measures, among them, and particularly relevant to our summer theme, the proposal to revoke the Extraordinary Contribution on Local Accommodation (CEAL), the expiry of licenses, and the delegation of local accommodation regulation to municipalities.

Practically speaking, for now, the bogeyman measure of the Package – forced rental, more media-friendly than actually relevant – has been dropped by revoking Article 108-C of the RJUE (Article 1, paragraph b, of Decree-Law 43/2024, of July 2) and the Government now has a 180-day legislative authorization to ensure that no local accommodation owner will pay the CEAL retroactively from December 31 of last year.

The legislative authorization also includes powers to revoke the obsolescence coefficient applicable to local accommodation establishments for IMI (property tax) purposes, although it does not address the expiry of licenses or the issuance of new local accommodation registrations for apartments and lodging establishments in autonomous fractions, which, under Article 19 of the Package, is suspended nationwide (except for inland territories defined by ordinance and Autonomous Regions).

Returning briefly to forced rental measures, the fierce criticism has always seemed to me to be exaggeratedly populist. One does not need to advocate for radical leftist views to believe in the social purpose of housing. It is even easy to recognize that, in our Democratic Rule of Law, only the temperate Mediterranean climate and unique cuisine are absolute (codfish cakes with cheese naturally out of the equation).

Rights, property rights and others, are relativized within the dynamics of the social contract and are harmonized or reduced in their meaning and scope based on other rights. But above all, aside from the political-philosophical discussion, forced rental, while not unprecedented (see Article 108-B of the RJUE), would still be a measure so marginal that the heading of the defunct Article 108-C of the RJUE could well be “phantom rental of vacant properties.”

Timidly, the Law (the Decree, to be precise) stated that whenever necessary to guarantee the social function of housing, the municipality could, exceptionally and supplementary, proceed with forced rental. Thus, based on the systematic and teleological interpretation of the Package, this means that as long as there was a vacant State property susceptible to being integrated into an affordable rental program, no private property could be forcibly rented. Or in other words, in the supplementary logic of the measure, only after all State vacant buildings were allocated to affordable rental programs, and still not guaranteeing the social function of housing, could municipalities advance with forced rental measures. I say this, not being a Public Law expert, but already glimpsing enough critical mass to challenge the administrative act. But those are past waters, for the sake of healthy coexistence between the social purpose of housing and property rights.

Timidly, the Law (or more precisely, the Decree) stated that whenever necessary to ensure the social function of housing, municipalities could, exceptionally and subsidiarily, proceed with forced rental. According to the systematic and teleological interpretation of the Package, this means that while there was state-owned vacant property available for integration into an affordable rental program, no private property could be forcibly rented. In other words, under the supplementary logic of the measure, only after all state-owned vacant properties were allocated to affordable rental programs, and if the social function of housing was still not ensured, could municipalities proceed with forced rental measures. This is my perspective, even though I am not a Public Law expert and could foresee bold legal challenges to such administrative acts. All past waters now, for the sake of harmonious coexistence between the social function of housing and property rights.

With no immediate special updates from the government for the hotel industry (aside from the new airport and railways), there is always room to critically analyze relevant aspects of the integration of the SIMPLEX from January with the legal framework for the establishment, operation, and functioning of tourism projects (RJIEFET).

Urban operations associated with tourism projects follow the RJUE regime, as amended by SIMPLEX, although with their own specificities, immediately raising interpretative doubts, not about what is omitted from the RJIEFET, but about matters specifically regulated there.

We highlight, among the significant changes to the RJUE, the favorable PIP (Prior Information Request) as a means of exempting licensing for urban operations, provided certain requirements are met; the end of the option for licensing operations subject to mere prior communication; and the elimination of the use permit.

While SIMPLEX aims to also simplify urban operations for tourism projects, we note that the RJIEFET maintains the requirement for prior communication with a deadline for the construction (Articles 23 and 23-A of the RJIEFET), raising doubts about the applicability of the favorable “detailed PIP.”

The RJIEFET also maintains the possibility of opting for licensing for operations subject to prior communication, an essential factor for defining investment strategy and evaluating project development risks, and the usage permit continues to be the determining title for opening a tourism project to the public.

A clarification of the applicable framework is necessary and very convenient from the perspective of sector operators and even municipalities themselves, for the sake of the indispensable dialogue process in conducting the urban planning procedure, the desired standardization of the procedures from north to south of the country, so that all participants use the same dictionary.

The article, as published in Vida Judiciária: