The housing crisis in Lisbon

Lisbon was once widely regarded as one of Europe’s most affordable capitals; however, this perception has shifted dramatically in recent years, as the city now finds itself facing a housing crisis that is increasingly difficult to ignore, transforming what was once a clear competitive advantage — the combination of relatively low living costs and a high quality of life — into a complex structural challenge that affects the community as a whole.

At the heart of this issue lies a pronounced imbalance between supply and demand, as the demand for housing has expanded at a significantly faster pace than the available supply, a trend that has been reinforced by the steady influx of foreign investment and the continued growth of tourism, both of which have intensified pressure on the housing market, while construction activity has failed to keep up with this acceleration. According to recent data, rental prices in Portugal increased by approximately 5.3% in 2025, with Lisbon leading this rise, and although this figure may initially appear moderate, it must be understood in the context of several consecutive years of sharp increases, which together have substantially worsened housing affordability.

As a consequence of these developments, Lisbon has become the most expensive city in the country for renters, with the median price reaching around €17 per square meter by late 2025, a level that translates into a typical apartment costing more than €1,300 per month, thereby placing a growing financial burden on households, particularly when considering that wage growth has not kept pace with the rapid escalation in housing costs.

This widening gap has led to visible social consequences, as many young professionals and students are increasingly being displaced from the city center and forced to relocate to peripheral areas or to share overcrowded apartments, while, at the same time, a growing number of families are resorting to shared housing arrangements in order to manage rising expenses, illustrating how access to adequate housing is no longer guaranteed even for individuals with stable, full-time employment, and, in more extreme cases, how middle-income earners are also encountering significant difficulties in securing reliable and long-term accommodation.

Nevertheless, rising prices alone do not fully explain the depth of the crisis, which also reflects broader inefficiencies within the housing market, including the existence of a substantial number of vacant or underutilized properties, as well as a climate of regulatory uncertainty that discourages some property owners from entering or remaining in the rental market, factors that, when combined, have contributed to a 44% increase in eviction cases in 2025, thereby exposing the growing financial strain experienced by tenants.

Although public debate frequently attributes responsibility for the crisis to short-term rentals and foreign buyers, and while these elements undeniably play a role in shaping market dynamics, the reality is considerably more complex, as the fundamental issue continues to be the insufficient supply of housing relative to demand, a structural imbalance that, if left unaddressed, makes it highly unlikely that prices will stabilize in the near future.

In response to these challenges, the Portuguese government has begun to implement a series of measures, including the introduction of incentives aimed at supporting young homebuyers and the development of plans to expand the stock of affordable housing; however, despite the ambition to construct tens of thousands of new homes by the end of the decade, the impact of these initiatives is expected to materialize only gradually, limiting their immediate effectiveness.

Ultimately, Lisbon’s housing crisis raises a broader and more fundamental question regarding the role of housing within society, namely whether it should be treated primarily as a financial investment or as a basic social good, a distinction that will play a decisive role in shaping the future trajectory of the city.

If current trends persist, Lisbon risks becoming increasingly inaccessible to its own residents, a development that could undermine social cohesion and weaken long-term economic sustainability, thereby making it clear that addressing the crisis will require more than short-term interventions, as meaningful progress will depend on a sustained commitment to expanding housing supply, improving regulatory frameworks, and ensuring affordability, without which the city’s continued growth may ultimately come at the expense of those who have long called it home.