After years of criticism from labor unions and other progressive groups, the Bank’s own chief economist is accusing his colleagues of ideologically-driven data manipulation.
Alfama district of Lisbon, Portugal
In the picturesque Alfama district of Lisbon, Portugal, Carla da Cunha and her family wonder where they will go when they are eventually forced out of their apartment – possibly as early as this September – thanks to the onward march of gentrification.
“It’s a shame,” the 37-year-old mother-of-two told Equal Times. “Moving to a new home means we have to start again from scratch. We’re going to at least try to find a place in the same area, for the kids to stay at the same school, but it’s very difficult to find something that we can afford.”
Carla and her husband make and sell artisan crafts at local fairs to support themselves and their two daughters, aged 7 and 15. They live in a building sold to investors who intend to convert the homes into apartments for short-term rental, and there are thousands more like them.
At least 1,700 families were evicted from their homes in Lisbon last year, according to the Portuguese Order of Lawyers. As a result, thousands of people have signed the Morar em Lisboa (Living in Lisbon) petition which calls on the government to amend the rental law to provide mechanisms to discourage property speculation and introduce quotas for more affordable rents.
“People in the neighborhood are being bullied out of their homes for richer consumers to move in,” explains Maria Lurdes Pinheiro, president of the Association of Heritage and Population of Alfama, who signed the petition.
Alfama, featured in the 1994 Wim Wenders film Lisbon Story still seems like a village. But the area, which is one of the oldest districts in Lisbon as well as the birthplace of Portugal’s beloved fado music, is now dominated by souvenir shops and tourists with selfie-sticks, driven around in tuk-tuk taxis. Most of the buildings that a few years ago were crumbling are now renovated and rented for short-term stays.
Renting a home in Lisbon today is extremely expensive, not only for low income families but also for the middle class, says Agustin Cocola Gant, a research fellow at the Centre for Geographical Studies in Lisbon.
“People in the neighborhood are being bullied out of their homes for richer consumers to move in.”
Maria Lurdes Pinheiro, president of the Association of Heritage and Population of Alfama
The average rent for an apartment in Lisbon is now €830 per month, which is 23 percent higher than a year ago, according to real estate consultant CBRE. Another study by Confidencial Imobiliario shows that the average rent in 2012 was €566.
“The liberalization of rent controls that took place in 2012 is to blame. But so is the growth of Airbnb rentals and the country’s gold visa scheme for foreign investors [granting them the right to residence in Lisbon by investing at least €500,000 in real estate], as well as the arrival of international visitors, students, or young professionals from Europe,” Cocola Gant says.
The tourism sector has helped pull Portugal out of recession, creating €12.6 billion (US$14.8 billion) in revenue in 2016 and employing around 27,000 people. But “tourism is not a long term solution,” Cocola Gant says.
“In Spain, for instance, the towns that rely on tourism are amongst the poorest in the country, such as Benidorm,” he explains. “The kind of jobs created through tourism are precarious and seasonal. Those workers do not pay the kind of taxes that a sustainable economy needs.”
Lisbon is not alone in trying to figure out how to stop the negative effects of gentrification and provide affordable housing, with Berlin’s local council recently making moves to reinforce rent controls and drastically reduce the number of Airbnb rentals available in the city. Barcelona has also taken strong measures to curb tourism, including a ban on the construction of new hotels in the city center and limits on the number of beds on offer in hotels and short-term lets.
In Portugal, the blame for rising rents and evictions is largely placed on Portugal’s 2012 rental law, introduced by the previous center-right government. It was supposed to breathe fresh air into a real estate market characterized by rent freezes that saw families paying rents that dated back to the 1990s, which landlords had trouble terminating. But the new law also meant rent increases for the people hit hardest by the recession, and evictions were made easier.
Another incentive, Marques suggests, is an urban rehabilitation policy “with an appropriate fund facility to encourage landlords to renovate their properties, while maintaining their tenants and practicing accessible rents, without forgetting that there are landlords with the same economic difficulties as their tenants.”
The local council is now making housing a “priority”, Marques says, adding that the regional authority has invested more than €66 million (US$77 million) over the past three and a half years in municipal housing, including both rehabilitation and construction.
The Lisbon City Council has also introduced the Programme for Accessible Rents initiative which will offer up to 7,000 apartments in 15 neighbourhoods across the Portuguese capital for around €250-450 (US$ 290-530) per month in a bid to develop the city and attract young tenants, in particular.
There is also another programme launched by the city council aimed at saving Portugal’s traditional stores. The Lojas com Historia (shops with a history) initiative will grant €250,000 (US$290,000) of social support to 63 shops seeking to invest in conservation and restoration works, or to promote their shops through cultural activities.
The current Socialist government of Prime Minister António Costa recently modified the rental law. It now aims to protect low-income families, the disabled and the elderly, by extending a five-year transition period to protect poorer tenants from a liberalized market until 2020.
But the director of Lisbon’s Association of Proprietors (ALP), Luís Menezes Leitão, has voiced concerns that changing the rental law or banning short-term rental will have a negative impact on landlords.
“The Living in Lisbon movement has been successful in causing the rental law to be altered, but this will negatively affect proprietors,” Menezes Leitão says. “These alterations caused great distrust on behalf of landlords who stopped putting their homes on the rental market.”
Further modifications to the law will “worsen the situation, leading more and more proprietors to stop putting their homes on the market, which will drive up rents even further,” he explains.
Luis Mendes, an expert from the Institute of Geography and Territorial Planning at the University of Lisbon, recognizes that Portugal previous decision to liberalize its property market was helpful during the worst of the economic recession, but he warns that the government and the city council must try to strike the right balance.
“The city is now vibrant and dynamic, the streets are prettier and there is more employment,” he says. “The dark side is that we are not making the most of this opportunity when it comes to social justice and neighborhood patterns. We run the risk of degrading the city’s historic center and losing an important opportunity.”
Mendes’s greatest fear is that Lisbon’s urban regeneration is “destroying the city’s social fabric. Bakeries and butchers are giving way to gourmet burger restaurants.” If Lisbon “ends up like a donut, with all the people in the suburbs, it will be a dead city.’’
Originally published by Equal Times.