Housing conditions in Portugal

Fátima Loureiro de matos Un i v e r s i t y o f Po r t o HOUSING CONDITIONS IN PORTUGAL doi: 10.2478/v10089-008-0020-8 ABSTRACT. this paper aims to analyse the changes that have taken place over the last decade in housing conditions in Portugal, based on data collected in the last two Housing Censuses (1991 and 2001) published by the Portuguese National statistics institute. the information available for this period indicates intensive construction dynamics in Portugal. the real estate development in some Nuts (Nomenclature of territorial units for statistics) exceeds the growth in the number of households, pointing clearly to a concentration of investments in housing, and has broadened and accentuated previous tendencies in the expansion and structural transformation of areas under construction. When considering this situation, two issues arise: the way in which this dynamic in production mirrors the relationships between households and housing, and the main spatial variations in these processes. thus, the changes operated in the occupancy and ownership of housing are described, with particular attention paid, on the one hand, to an increase in easy access to home ownership, to the detriment of other forms of housing occupancy and, on the other, to changes in the profile of buildings, as well as more qualitative aspects of the housing stock. despite the substantial expansion of the housing stock and improvements in its quality, as a result of the many social housing programmes implemented by successive governments, some NUTS still display significant housing deficiencies. KEY WORDS: Portugal, housing stock, housing conditions, housing deficiencies. INTRODUCTION the results of the 1991 and 2001 Censuses, published by the National statistics institute, highlight some features of the resident population, households, buildings and housing, according to several spatial breakdowns. a study centred on housing can apply this information to perform different types of analysis: buLLetiN oF geograPHy socio–economic series No. 11/2009 Fátima Loureiro de matos — 50 — – first, it is possible to quantify the evolution of the housing stock, comparing it with previous periods, or with other points of reference, which is commonly known as construction dynamics; – it is also possible to analyse the way in which real estate dynamics are mirrored in the relationship between households and housing, through data on occupancy and ownership and on some of their qualitative aspects. This analysis allows us to consider the conditions of housing occupancy, an indicator of the stock’s capacity to accommodate resident families and the quality of the housing; – lastly, we can highlight the territorial dimensions of these housing expansion processes and the changes in the relationships between households and housing. in this case, attention should be drawn to real estate development models, emphasising areas with greater construction dynamics, which reflect a dominant logic of housing location and identify changes in the typology of construction. this paper aims to provide insights into the housing stock in Portugal. the analysis is based on the Nuts 1 regions (mainland Portugal and autonomous regions of madera and azores) and the Nuts 2 of mainland Portugal (North, Centre, Lisbon and tagus Valley, alentejo and the algarve). CONSTRUCTION DYNAMICS the rise in housing has always been higher than 20% in the last few decades in Portugal, even though the growth rates declined from 1970 to 2001: 27% in the 1970s, 22% in the 1980s and 21% in the 1990s. at the international level, trends in Portugal followed similar patterns to those of other Western countries, with construction rates peaking in the 1970s as a response to the housing needs of the post-war baby boom generation. the drop in housing growth rates in the following decade was however smaller than in other european countries, and the rise in the Portuguese housing stock in the 1990s was in fact significantly higher. For example, the growth rate in the time span considered (1991–2001) is more than double that of France and spain, and more than triple that of italy (rodrigues, 2002). the number of dwellings has practically doubled over the last three decades and the growth rate is consistently higher than that of number of households, which in 2001 placed Portugal at the second highest housing ratio per household (1.38) within the eu, only surpassed by spain (1.44). HousiNg CoNditioNs iN PortugaL — 51 — in regional terms, the number of dwellings exceeds the number of households in the North, Centre and algarve regions in the 1990s, whereas the ratio is more balanced in the other regions (tab. 1). the housing growth rate in the 1990s was higher than that of buildings, which revealed an increase in average building size, going from 1.46 to 1.6 dwellings per building. in territorial terms, the Lisbon and tagus Valley region stands out from the others, with an average size of 2.4 dwellings per building, as does the algarve with an above average size of 1.7. With regard to the age of the housing stock, only 14% of the existing dwellings were built before 1945. in the last three decades, construction rates and rates of land occupation were very high, as about 63% of the conventional housing in 2001 had been built between 1971 and 2001. in territorial terms, all regions experienced intense real estate development in the last few decades (tab. 2). table 1. Conventional dwellings and resident Households, 1991 and 2001 Nuts 2 Conventional dwellings 1991 Households 1991 Conventional dwellings 2001 Households 2001 North 1,278,948 1,009,594 1,605,157 1,203,226 Centre 812,433 566,771 945,322 566,771 Lisbon and V.t. 1,422,198 1,108,205 1,701,426 1,286,765 alentejo 267,289 192,694 304,539 200,884 algarve 211,288 117,015 276,093 147,014 madeira 79,001 64,911 94,271 72,938 azores 83,810 62,886 92,617 71,389 Portugal 4,154,967 3,315,708 5,019,425 3,619,528 Source: National statistics institute, 1991 and 2001 Censuses. table 2. Conventional dwellings by construction period (%), 2001 Nuts 2 dwellings before 1945 dwellings 1945– 1970 dwellings 1971– 2001 North 14% 20% 66% Centre 16% 24% 60% Lisbon and V.t. 10% 30% 60% alentejo 28% 22% 50% algarve 11% 18% 71% madeira 16% 20% 64% azores 20% 20% 60% Portugal 14% 23% 63% Source: author’s computations based on data available from the National statistics institute, 2001 Census. Fátima Loureiro de matos — 52 — in terms of regional distribution, the average age of the housing stock is higher in the alentejo, and Lisbon and tagus Valley, while the algarve, North, madeira and the azores have a more recent stock, a result of a more intense construction dynamic in the last few decades (tab. 3). FORM AND REGIME OF OCCUPANCY a common trait throughout the european union is the increased ease of access to home ownership and a slowdown, or at least stagnation, in the rental market. this feature is more relevant in the southern european countries (allen, 2004) and has marked social and economic development in Portugal over the last few decades. For example, spain, greece, italy and Portugal show higher rates of owner-occupied housing (over 70%) than countries of Northern europe (austria 58%, belgium 68%, denmark, 53%, Finland 63%, the Netherlands 55%, sweden 46% and the united Kingdom 69%) (Housing statistics in the european union, 2004, p. 50). several factors have enabled this access to ownership, among them cultural features, a rise in family income, abundant supply and relative stability in prices. also relevant are public policies which favour lines of credit, in detriment of support for renting. several aspects of the development of the housing stock in Portugal in the 1980s and 1990s can be highlighted: a rise in access to home ownership on the part of a large number of households, the number of second homes increased, and the real estate market revealed some signs of surplus. table 3. average age of buildings Nuts 2 average age of buildings North 38.4 Centre 40.8 Lisbon and V.t. 42.9 alentejo 46.5 algarve 40.3 madeira 35.6 azores 38.5 Portugal 38.5 Source: author’s computations based on data available from the National statistics institute, 2001 Census. HousiNg CoNditioNs iN PortugaL — 53 — In 1991, 65% of housing classified as permanent place of residence was owner-occupied. This figure rises to 76% in 2001, revealing a significant shift in home ownership regimes. rented housing used as permanent place of residence dropped from 28% in 1991 to 21% in 2001. in absolute terms, these indicators bear another meaning. between 1991 and 2001, the number of fully-owned permanent dwellings goes from 1.9 million to 2.7 million, revealing the true dimension of home ownership. Volatility in the global economy and the housing market, together with instabilities in the labour market, leading to profound impacts on household income and savings, raise the question as to whether the younger generations will have such easy access to housing and affordability as their parents did, supported by the market and the state since World War ii. access to home ownership did indeed coincide with a period of strong growth in housing stock and public investment in housing, a situation which no longer holds true today. sharp cuts have been made in public investment, thus increasing the incentives for home ownership – particularly in eu countries, due to the well-known budgetary control collectively embraced by member countries – a reality which has been in place for almost a decade (strategic National Housing Plan 2007, p. 32). the high percentages of access to ownership in Portugal can be explained by a combination of factors, among which: – supply restrictions in the private rental market, resulting from prolonged rent control and the inflexibility of the legal rental regime up until 1990; – new opportunities to apply savings in more profitable financial products, thus substituting savings accounts which where usually invested in building houses for rent; – insufficiency of the social housing sector; – mortgage policies, associated with a significant drop in interest rates. in absolute terms, rented dwellings dropped from 840 thousand to 740 thousand, which means that the decline in rentals was significantly lower than the rise in home ownership. This situation reflects not only the importance of renting in historic or old urban areas, but also stagnation and disinterest in the rental market in the urbanised areas in the last few decades. the rental market in Portugal is marked by a clear gap. on the one hand, there are the dwellings rented before 1990 (60% of total rented dwellings in 2001), with very low rents, frequently suffering from severe deficiencies in terms of comfort and safety, inhabited by a largely low-income, elderly population, who is protected by legislation which ensures it transmissibility of the contract; on the other, a restricted number of free market rental dwellings with very high rents. in 2001, conventional dwellings rented after 1990 and, thus, subject to new Fátima Loureiro de matos — 54 — rent control rules, accounted for only 8% of the total conventional dwellings in Portugal (40% of the total rented dwellings). When analysing the distribution by rent bracket, we find that 30% of the dwellings rented before 1975 had rents lower than 15€; for contracts between 1975 and 1986, the figure dropped but remained the most representative bracket in the distribution (19%). among the dwellings rented after 1990, the rent bracket with the most weight varied between 300€ and 400€, and accounted for 15% of the total. With regard to regional distribution, in 2001, home owners predominated in all regions, with particular incidence in the Centre and azores regions, showing higher percentages. Rentals find greater weight in the Lisbon and Tagus Valley and the North regions (tab. 4). although in 2001 a majority of homeowners did not have mortgages, between 1991 and 2001, there was an increase in the number of homes purchased with housing loans, following closely the rise in homeowners, table 4. Form and occupancy regime of housing in 2001 dwellings Permanent Place of residence %seasonal housing % Vacant % owned % rented % Country 5,019,432 3551,236 70.7 924,419 18.4 543,777 10.8 2,688,469 75.7 740,425 20.8 North 3,115,157 1182,065 37.9 255,800 8.2 1,677,292 53.8 870,230 73.6 263,066 22.3 Centre 945,322 625,186 66.1 223,398 23.6 96,738 10.2 534,693 85.5 74,772 12.0 L.V.t. 1,701,426 1260,762 74.1 244,328 14.4 196,336 11.5 902,383 71.6 323,571 25.7 alentejo 304,539 198,495 65.2 67,559 22.2 38,485 12.6 154,435 77.8 32,290 16.3 algarve 276,093 144,040 52.2 106,195 38.5 25,858 9.4 109,035 75.7 28,269 19.6 madeira 82,671 71,539 86.5 1,228 1.5 9,904 12.0 58,639 82.0 11,164 15.6 azores 92,624 69,149 74.7 14,311 15.5 9,164 9.9 59,054 85.4 7,293 10.5 Source: author’s computations based on data available from the National statistics institute, 2001 Census. table 5. owner-occupied dwellings with mortgage (%), 1991 and 2001 Nuts 2 1991 2001 North 18% 28% Centre 12% 21% Lisbon and V.t. 48% 50% alentejo 18% 25% algarve 19% 28% madeira 8% 19% azores 22% 29% Portugal 22% 31% Source: author’s computations based on data available from the National statistics institute, 1991 and 2001 Censuses. HousiNg CoNditioNs iN PortugaL — 55 — which went from 22% in 1991 to 31% in 2001. at regional level, the number of owner-occupied homes with mortgages rose in all regions between 1991 and 2001, with the Lisbon region reaching the highest value, where half of the owneroccupied dwellings had mortgages in 2001 (tab. 5). in 2001, at national level, the monthly loan repayment was about 300€, while the average rental rate was 125€. regionally, this disparity is more accentuated in the madeira region (the region with the highest average loan repayment rate) (tab. 6). Within the general context of conventional housing, second home ownership and vacant dwellings have also been on the rise. second home ownership rose from 15.9% in 1991 to 18.4% in 2001, a very high figure in the context of Europe. in absolute terms, second homes increased from 658 thousand to 924 thousand, which means that this type of dwelling has almost doubled. this increase in seasonal housing is associated with the importance of second homes, traditionally located in seaside areas, but which has recently shown growing demand in inland rural areas and the islands. these dwellings are usually occupied during vacation periods and at the weekend by both the Portuguese population, particularly from urban areas, and by foreigners, predominantly from the north of europe, but also from outside europe, due to the growing tourist attraction of some regions, namely the algarve and alentejo, and the entire mainland coastal belt. all types of second homes are being built near the seaside, from luxurious private villas located in secluded areas or in privileged settlements, to much cheaper small apartments. the homes of families which have emigrated to the country’s large urban centres or abroad are also considered second homes, essentially located in the inland regions or on the islands. In fact, a significant percentage of Portuguese emigrants have invested their savings in the construction of houses in their home table 6. average monthly expenses with housing, 2001 Nuts 2 rent Homeowners North 100€ 300€ Centre 150€ 280€ Lisbon and V.t. 130€ 260€ alentejo 90€ 230€ algarve 160€ 270€ madeira 120€ 360€ azores 150€ 220€ Portugal 125€ 300€ Source: author’s computations based on data available from the National statistics institute, 2001 Census. Fátima Loureiro de matos — 56 — towns, which they only occupy at certain times of the year, usually when they are on vacation or during annual festive events, such as Christmas. as for vacant dwellings, they accounted for 10.6% of the housing stock in 1991, and reached 10.8% in 2001. these percentage values, apart from being quite high, translate in absolute numbers to 440 thousand dwellings in 1991 and 544 thousand in 2001. Thus, in a housing stock comprising five million conventional dwellings, about half a million are vacant, which is a very high number. Vacant dwellings cover a wide range of situations, such as the case of homes on the market (for sale or rent) and those up for demolition. The significant weight of vacant dwellings reveals, on the one hand, a greater discrepancy between potential supply and the demand for housing and, on the other, a significant number of uninhabited dwellings, many in a state of disrepair, without any type of use; a problem which has yet to be solved. there is however no easy solution in the current context of Portuguese housing policy. at regional level, in 2001, seasonal dwellings recorded the highest figures in the Algarve, Centre and the azores regions, while the vacant ones carry greater weight in the North, alentejo and madeira regions (tab. 4). Vacant dwellings follow the location patterns of permanent places of residence, taking on a relative prevalence in rural areas, a situation which reflects depopulation and abandonment, primarily as a result of population migrations domestically and abroad. They also carry a significant absolute weight in urban areas, partially associated with market surplus, and the abandonment and degradation of central areas, particularly in the two metropolitan areas (Lisbon and Porto). QUALITY OF THE HOUSING In terms of housing quality, the 1990s witnessed a reduction in nonconventional housing (–1%), particularly of slums, in part as a result of the special Housing relocation Plan, implemented in 1993 in the two metropolitan areas, where this type of housing had greater weight. the intention was to eradicate the slums and relocate families in new social housing blocks. despite this reduction, at regional level in 2001, the number of non-conventional dwellings is still very high in the Lisbon and tagus Valley region and in the North (tab. 7), a situation which highlights the greater level of substandard, inadequate housing conditions for a significant number of households. in 2001, Portugal presented almost complete coverage in terms of electricity (99.5%), water supply (97.7%), plumbing (96.3%) and sanitary facilities (95.7%) HousiNg CoNditioNs iN PortugaL — 57 — in all regions. almost all (91%) of the buildings recorded in the 2001 Census were served by urban waste collection systems. it is only in the algarve (84%), Alentejo (89%) and the North (89%) that these figures were below 90%. in fact, basic infrastructure coverage registered most of the substantial improvements since the 1980s, particularly in terms of household plumbing and waste collection, as the situation was highly deficient in the 1970s. This improvement stemmed essentially from investments on the part of local government. Heating, particularly central heating, registers a much lower coverage, reaching only 5% of recorded dwellings in the 2001 Census. this type of infrastructure is still very recent and sparsely available, when compared to other european countries. Central heating has greater weight in the North (8%) and Centre (7%), as a result of both climate conditions and the more recent expansion of the housing stock in these regions. DEFICIENCIES IN THE HOUSING STOCK Census data serves in part to evaluate the housing deficiencies of the Portuguese population. they can be evaluated in different ways, although the most usual method focuses on households living in substandard, inadequate housing conditions. This method aims to evaluate the dwellings’ “quantitative” deficiencies, taking as its prime indicators overcrowding, substandard housing, cohabitation situations, and permanent residences in need of major or very major repairs. the sum of these indicators allows us to determine that there are 481,648 dwellings in need of attention. However, if we consider another indicator, the housing stock required to guarantee the operation of the housing market, population mobility or other forms table 7. Non-conventional housing, 2001 Nuts 2 Non-conventional dwellings North 6,686 Centre 4,268 Lisbon and V.t. 11,960 alentejo 1,750 algarve 1,587 madeira 638 azores 430 Portugal 27,319 Source: National statistics institute, 2001 Census.