Lisbon’s Unaffordable Housing Crisis: A Dramatic Shift

Once a European capital known for its affordability, Lisbon has dramatically transformed into a city where housing costs are soaring. This shift has pushed many residents out, raising questions about the impact of global investment and tourism on local communities.

Soaring Prices and Unprecedented Unaffordability

Between 2014 and 2024, Lisbon’s housing prices surged by 176%, with even steeper increases—over 200%—in its historic districts. As a result, Lisbon now ranks at the top of Europe’s housing unaffordability index. This trend is not limited to the city, either. Portugal itself has climbed from 22nd to 1st place among EU countries in housing unaffordability.

“The current housing crisis reflects a stark disconnect between wages and property prices – with housing costs approaching those of global cities in a country where salaries remain among the lowest in Europe.”

—Author Name, Research Fellow

In a city where many earn less than €1,000 per month, affordable rentals are scarce. A recent study shows that the average rent in Lisbon has increased by 30% since 2020, making it increasingly difficult for locals to find suitable housing. (Global Property Guide, 2024)

Roots of the Crisis

Following the 2008 financial crisis, Portugal embraced aggressive liberalization to boost its economy, focusing on real estate investment and tourism. This included relaxed rental laws, tax incentives for non-resident buyers, and the promotion of short-term rentals and hotels. In Lisbon, approximately half of all homes now have licenses for short-term rentals. In some tourist-heavy areas, this figure hits 70%. Meanwhile, the number of hotels has tripled since 2010.

The Impact of Global Investment

As interest rates declined globally, housing became a haven for investors. Buying property in Lisbon became appealing, offering second homes, rental income, and potential property value appreciation, with median prices for foreign buyers significantly higher than those paid by locals. This influx of wealth has driven up prices, excluding many residents.

Consequences and Contradictions

The government’s policies, intended to stimulate the market, have, in the end, undermined the local population. Many original neighborhoods have experienced an outflow of local residents. While investment brought building improvements, it did not lead to residential stability. Instead, the escalation of property prices is not tied to a need for housing, but to the maximization of returns for investors.

The result is a city that favors international wealth at the expense of its own citizens, prioritizing global consumers over local needs. Locals are pushed out or forced to rent rooms, deepening social inequality. The rise in housing costs consumes a significant portion of household income, widening the gap between landlords and the broader population.