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Arcadis Portugal recently participated in a conference alongside PLMJ, a prestigious Portuguese law firm. The first edition took place in Lisbon on May 11th, 2023, and due to its success, a second edition was held in Porto on June 29th, 2023. The conference focused on the specific licensing challenges in the Portuguese property market, with a particular emphasis on Lisbon and Porto. The government's "Mais Habitação" program aims to simplify the licensing process and streamline the various stages and procedures involved.
Portuguese real estate has historically been an excellent distressed investment opportunity in the country, and it is expected to remain so in the coming years when compared to equities, fixed income, and cash. Presently, Portugal offers unique conditions, making it one of the most attractive destinations globally for travel, living, working abroad, and investment. The country imposes limited restrictions on foreign property ownership, and transaction costs are generally low. From the perspective of foreign buyers, Portuguese property offers outstanding value.
In recent years, Portugal has faced a housing crisis, with various factors contributing to the current situation. The press and industry experts have highlighted several reasons for this, including local politics and the economic environment. One major concern is the planning and licensing process, which poses risks for investors due to both delays in obtaining approvals and the complexity of the bureaucratic system.
The Golden Visa program has experienced significant growth, leading to the preservation and revitalization of the urban landscape in Lisbon and Porto. The market perceives this requirement as one of the factors contributing to the inflation of prices for 2 and 3-bedroom apartments in urban areas. While it is true that foreign buyers are attracted to Portugal due to the program's benefits, including a warm climate and lower cost of living, attributing the rise in property prices solely to this factor overlooks other crucial variables. These variables include excessive licensing delays, the scarcity of skilled labor, and the availability of materials, all of which are influenced by the broader political, economic, and social context in Europe.
The Government has recently approved a bill aimed at reforming and streamlining the licensing process in the field of urban planning. This new legislative proposal seeks to reduce bureaucratic hurdles, simplify procedures, and ultimately accelerate the construction of housing projects. The primary objective is to facilitate the expeditious development of a greater number of residential properties.
The bill specifically targets the elimination of excessive administrative requirements that do not contribute to the public interest. During our discussions, we focused on these urban planning procedures and the proposed simplification efforts. Under the SIMPLEX program, which is a priority for the government, the aim is to simplify administrative activities by continuously removing unnecessary licenses, authorizations, and administrative acts, ultimately working towards a "zero licensing" approach. The time required to obtain a license or project approval was a key topic of discussion, emphasizing the need for efficiency and timely decision-making.
During the conference, co-organized by PLMJ and Arcadis, there was a strong emphasis on the significance of conducting thorough due diligence, which involves carefully assessing the potential of an urban development project and identifying any associated risks, all within the framework of the urban planning regulations that govern the specific plot of land. Speakers highlighted the importance of evaluating measurable parameters such as the height of the building's facade, the potential for future expansion, and the permitted use type. Furthermore, the conference addressed the initiatives being undertaken by the city council to increase awareness and provide clarity regarding the instruction of licensing processes. These initiatives aim to inform and educate stakeholders about the intricacies of the licensing procedures.
The round table session brought together a diverse range of participants from the private, public, and academic sectors, as well as representatives from engineering and architectural organizations. The round table provided a platform for an in-depth exploration of the opportunities and threats associated with the licensing program in both Lisbon and Porto.
The Urbanistic "Simplex" (or "Complex") initiative was discussed in relation to the State's efforts to address the housing shortage through the introduction of the "More Housing Bill." This bill encompasses significant improvements aimed at streamlining bureaucratic processes. Its main objectives include increasing the number of available dwellings by allowing the conversion of commercial properties into residential units without the need for additional licenses. Additionally, it aims to make more plots of land available for development.
During our discussions, we focused on the licensing aspects of the bill, particularly its potential to expedite the licensing processes and provide legal certainty, specifically in relation to the removal of prior control (Bill PL n. º 77/XV). Currently, it is widely acknowledged that certain key questions hinder the efficiency of urban development operations, such as the disparity between the legal timeframe associated with project appraisals and the actual implementation timeline. Another concern is the potential divergence in understanding the urban planning framework between the licensing authority and project designers.
The current system of issuing permits will undergo a significant change, as the construction license will be replaced by the payment of municipal fees, and the license for use will be replaced by a prior communication within the given deadline or a simple prior communication, depending on whether prior control is involved. In cases where prior control is required, tacit approval will be implemented, causing concern among both developers and municipalities. While this measure aims to expedite the process, it lacks the necessary legal certainty for the property owner, as potential urban planning violations may go undetected despite the investments made and the completion of the real estate project.
The proposed changes also seek to bring transparency to the calculation of deadlines. It states that the approval timeline begins upon submission of the request, and deadlines are only suspended if the applicant takes more than 10 days to respond to requests. Additionally, requests for additional information or documents can only be made once. The introduction of one-time notifications for preliminary clearance and throughout the procedure will increase vigilance among city hall technicians and improve the overall instruction of the processes.
In conclusion, while the proposed reforms aim to simplify and expedite the licensing process, there are concerns regarding the lack of legal certainty for property owners and the potential for oversight of urban planning compliance. It is essential for the authorities to strike a balance between streamlining procedures and maintaining effective supervision to ensure the integrity of urban development projects.