Bet on "Build to Rent" will allow the program "Porto com Sentido" to offer 200 dwellings
04 Nov 2021
The new segment of the municipal program "Porto com Sentido" will allow lease promissory contracting in 200 dwellings still under project, construction, or rehabilitation, located in urban rehabilitation areas.
The Porto City Hall will act as an intermediary between the property owner and the final tenant, underlined the Councillor of Urbanism and Public Space and Housing, Pedro Baganha, in the introduction of the presentation session of the tender "Build to Rent", which took place in Casa do Infante. This new segment results from the deliberation that changed the terms of "Porto com Sentido", approved at the end of last year.
Pedro Baganha also highlighted that the municipal housing policy is based on three pillars: public investment, private promotion, and virtuous partnerships between the public and private spheres. This last dimension may eventually contemplate the construction of rentals affordable by private individuals on public land.
In the specific case of "Build to Rent", Porto City Hall is the guarantor of the rent, mitigating the risk of the property being "mistreated" (the municipality commits to deliver the property to the owner in the same conditions), there are no management costs, nor the risk of default. Developers can maximize their investment and benefit from the absence of market risk, the Councillor pointed out.
"I have an expectation that the 200 dwellings will be sold out quickly. It is my commitment that we are available to increase the share of 'Build to Rent' up to 1000 units or more", said Pedro Baganha, reiterating that this aspect "may become an important tool in the affordable rent policy". The opening of the tender is scheduled for the first half of November, he explained.
According to José Sequeira, coordinator of the promotion of the rehabilitation of affordable rental housing of the municipal company Porto Vivo, SRU, the "Build to Rent" will cover 200 apartments: 40 one-bedroom apartments, 120 two-bedroom apartments, and 40 three-bedroom apartments. The maximum rent ceiling of "Porto com Sentido" will also apply to this new modality: 480 euros in case of T0/T1; 780 euros for T2; and 950 euros for T3.
The lease contracts with the promoters and investors are signed for a period of up to 10 years, with tax exemptions according to the law (IRS, IRC, and IMI). After the first five years, the commitment is renewable at the promoter's will, explained José Sequeira, listing some of the advantages for the promoters: "attractive income, tax benefits, the possibility of immediate liquidity, ordinary maintenance of the properties", among others.
Each candidate can present up to 50 houses to "Porto com Sentido" - "Build to Rent", provided that the gross area is greater than 52m2. As an essential condition, the building permit must be issued until December 2022 and the work must start up until the following six months.
The case of the Netherlands
Referring in detail to the case of the Netherlands, Ricardo Valente pointed out that the average rent for social housing there is 753 euros, while the average rent on the rental market is 1000 euros. This is a marked discrepancy when compared to the case of Porto, where the average rent for social housing is around 55 euros.
"We have transformed 'Porto com Sentido', which was not increasing available housing stock, to a strand that increases it. We want to do this with the private sector", said the Councillor, concluding: "We hope that the State fulfils its part of fiscal stability. From a political point of view, the City's budget will never be a problem. We are at our disposal to double it", he emphasized.
The founder and director of Vida Imobiliária magazine, António Gil Machado, noted that the rental market "is much more reactive to the conjuncture than the buying/selling market. That's why it is more dynamic". Highlighting "Build to Rent" as a "safe rent program", the same responsible highlighted the advantages for owners.
Pedro Gama e Castro, from Millenium BCP's marketing department - IFRRU 2020, stated that the financing for rehabilitation must include energy efficiency solutions and that the full rehabilitation must include properties over 30 years old or with a proven low level of rehabilitation.
"This is one of the municipal programs to promote affordable housing. The most sought-after typologies are 1-bedroom and 2-bedroom - more 2-bedroom", clarified the executive director of Porto Vivo, SRU, Raquel Maia. "The municipality's budget only comes in when it's necessary to complete the household's effort rate", she further clarified, explaining that the municipal company follows the processes of requests for the transition from service license to housing, which has been occurring frequently.
The "Porto com Sentido" program was launched in 2020 and aims to introduce affordable housing of different typologies in the rental market of all the city's parishes.
In broad terms, the new segment of the municipal program "Porto com Sentido" aims to accelerate the stock of housing available in the city, engaging real estate developers to contract a lease commitment for an initial batch of 200 homes in the "Build to Rent" mode. The houses may still be under project, construction or in the rehabilitation phase, provided they are located in an Urban Rehabilitation Area (ARU).
The Porto City Hall will act as an intermediary between the property owner and the final tenant, underlined the Councillor of Urbanism and Public Space and Housing, Pedro Baganha, in the introduction of the presentation session of the tender "Build to Rent", which took place in Casa do Infante. This new segment results from the deliberation that changed the terms of "Porto com Sentido", approved at the end of last year.
Pedro Baganha also highlighted that the municipal housing policy is based on three pillars: public investment, private promotion, and virtuous partnerships between the public and private spheres. This last dimension may eventually contemplate the construction of rentals affordable by private individuals on public land.
In the specific case of "Build to Rent", Porto City Hall is the guarantor of the rent, mitigating the risk of the property being "mistreated" (the municipality commits to deliver the property to the owner in the same conditions), there are no management costs, nor the risk of default. Developers can maximize their investment and benefit from the absence of market risk, the Councillor pointed out.
"I have an expectation that the 200 dwellings will be sold out quickly. It is my commitment that we are available to increase the share of 'Build to Rent' up to 1000 units or more", said Pedro Baganha, reiterating that this aspect "may become an important tool in the affordable rent policy". The opening of the tender is scheduled for the first half of November, he explained.
According to José Sequeira, coordinator of the promotion of the rehabilitation of affordable rental housing of the municipal company Porto Vivo, SRU, the "Build to Rent" will cover 200 apartments: 40 one-bedroom apartments, 120 two-bedroom apartments, and 40 three-bedroom apartments. The maximum rent ceiling of "Porto com Sentido" will also apply to this new modality: 480 euros in case of T0/T1; 780 euros for T2; and 950 euros for T3.
The lease contracts with the promoters and investors are signed for a period of up to 10 years, with tax exemptions according to the law (IRS, IRC, and IMI). After the first five years, the commitment is renewable at the promoter's will, explained José Sequeira, listing some of the advantages for the promoters: "attractive income, tax benefits, the possibility of immediate liquidity, ordinary maintenance of the properties", among others.
Each candidate can present up to 50 houses to "Porto com Sentido" - "Build to Rent", provided that the gross area is greater than 52m2. As an essential condition, the building permit must be issued until December 2022 and the work must start up until the following six months.
The tender will take place over six months and applications will be made electronically and will be increasingly valued according to three factors: lowest rent per square meter; insertion in one of the three existing ORU (100%), in addition to the essential condition of being inserted in an ARU (50%); and execution time - the closer the construction is to the end of the work, the better score.
The Councillor of Finance, Economy and Employment, Ricardo Valente, stressed that housing is a "complex issue for which there is no single solution". "It is a problem that affects the whole world", he noted, citing the example of the Nordic countries, which are highly praised for their social housing.
Referring in detail to the case of the Netherlands, Ricardo Valente pointed out that the average rent for social housing there is 753 euros, while the average rent on the rental market is 1000 euros. This is a marked discrepancy when compared to the case of Porto, where the average rent for social housing is around 55 euros.
"We have transformed 'Porto com Sentido', which was not increasing available housing stock, to a strand that increases it. We want to do this with the private sector", said the Councillor, concluding: "We hope that the State fulfils its part of fiscal stability. From a political point of view, the City's budget will never be a problem. We are at our disposal to double it", he emphasized.
The founder and director of Vida Imobiliária magazine, António Gil Machado, noted that the rental market "is much more reactive to the conjuncture than the buying/selling market. That's why it is more dynamic". Highlighting "Build to Rent" as a "safe rent program", the same responsible highlighted the advantages for owners.
Pedro Gama e Castro, from Millenium BCP's marketing department - IFRRU 2020, stated that the financing for rehabilitation must include energy efficiency solutions and that the full rehabilitation must include properties over 30 years old or with a proven low level of rehabilitation.
"This is one of the municipal programs to promote affordable housing. The most sought-after typologies are 1-bedroom and 2-bedroom - more 2-bedroom", clarified the executive director of Porto Vivo, SRU, Raquel Maia. "The municipality's budget only comes in when it's necessary to complete the household's effort rate", she further clarified, explaining that the municipal company follows the processes of requests for the transition from service license to housing, which has been occurring frequently.
The "Porto com Sentido" program was launched in 2020 and aims to introduce affordable housing of different typologies in the rental market of all the city's parishes.
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