How Lisbon and other world cities are tackling the affordable housing crisis

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Carlos Moedas, Mayor of Lisbon, Lisbon Municipality

• Housing prices between 2012 and 2022 have increased by 120% in Lisbon, Portugal.
• The Portuguese capital has adopted a multi-dimensional approach of short-term solutions and long-term investments backed by a six-year, multi-million-euro investment plan to help develop affordable housing in the city.
• The city has seen early success with its strategy to revamp affordable living for locals and has adopted key principles to channel real estate investment into tackling the housing crisis.

As a result of low public investment levels and the absence of strong public policies in the last decade, housing prices between 2012 and 2022 have increased by 120% in the Portuguese capital. Rental prices have also increased significantly, reaching more than 30% in the past five years. At the same time, income levels have remained relatively steady, thus hurting the purchasing power of the local population.

Since 2021, Lisbon has adopted an innovative multi-dimensional approach, putting short-term solutions and long-term investments in place. An €800-million public investment plan backs the strategy for 2022-2028, the largest in 30 years. In less than two years, this new vision has already shown results:

• City Hall has built and renovated over 1,500 homes for medium- and low-income people, compared with only 17 apartments per year in the past 14 years.
• A new programme has been set to renovate 2,000 vacant flats in 11 boroughs.
• Local government is purchasing real estate properties at market value to be renovated and rented out at lower prices.
• Low-income families who pay over 30% of their income in rent are eligible for a subsidy from the city to maintain their payment below 30%.
• Licensing procedures for construction have been significantly improved and streamlined by digitization and reducing deadline times, with fast-tracking for smaller projects delivering licensing within two months or less compared with nine months in the past.
• The Urban Planning Academy was created to prevent real estate developers from submitting incomplete or non-compliant processes, which previously occurred in 70% of submissions.
• Lisbon City Hall is initiating five housing co-operatives that provide citizens with the land to develop housing projects at a lower cost.
• The municipality delivers apartments to people with key roles in the city (police, healthcare professionals, teachers etc).
• A Housing Hackathon mobilizes Lisbon’s strong tech sector, asking entrepreneurs to help design disruptive solutions.
• A new public-private programme will be launched where the municipality leases land for 90 years for private companies to develop affordable housing projects.

This multi-pronged, holistic strategy is re-establishing affordable living conditions in Lisbon for locals, allowing younger generations to stay in the city centre.

Global examples of best practice

As the global housing crisis presents significant social and economic challenges, cities must develop collaborative approaches to tackle current and future housing shortages. Local conditions must be considered; however, key principles can provide some guidelines.

1. Shared goals and vision

The public, private and civil society sectors must develop a common vision for addressing the housing shortage. Establishing shared goals will provide a foundation for cooperation and help align critical efforts.

For example, in the United Kingdom, the not-for-profit National Housing Federation is working with the government to address barriers to building new homes for sale, rent and affordable home ownership.

2. Policy frameworks

By creating supportive policy frameworks, national and local governments can incentivize private sector participation in affordable housing projects. Tax incentives, streamlined permitting processes and zoning changes are particularly effective in encouraging the development of affordable housing.

The YIMBY (“Yes In My Backyard”) movement in the United States advocates for increasing housing supply through changes in zoning regulations and development policies. In California, YIMBY has contributed to ending exclusionary and single-unit zoning, enabling 2.2 million homes to be built in the state.

3. Public-private cooperation

As a joint effort between governments and private companies to develop and manage housing projects, these partnerships can leverage the strengths of both sectors – combining public resources and planning capacity with private innovation and efficiency.

In Toronto, the Daniels Corporation partnered with the housing authority to redevelop neglected social housing into a mixed-use, mixed-income community that guarantees all residents the right to return.

4. Community building

Working with citizens to design inclusive and sustainable urban solutions has become a key piece of the puzzle. Mobilizing collective intelligence helps make more conscious decisions, adapt projects to the population’s needs and promote a “community spirit” among locals.

Cities such as Paris, Lisbon or Brussels now have permanent citizen assemblies to support decision-makers in solving not just the housing shortage but also other challenges, such as mobility, healthcare or education.

5. Innovation and technology

The private sector is keen on providing innovative techniques, materials and technologies to increase the efficiency, affordability and sustainability of housing construction. Governments can support these efforts by fostering a regulatory environment that encourages the adoption of new solutions.

For instance, Estonian engineering firm Kodasema is working with the government to develop modular KODA houses that can be set up in a day.

When it comes to solving the global housing crisis, one size does not fit all. Looking at different approaches worldwide, it becomes clear that there is neither a miraculous solution nor a definitive answer.

Solving the housing shortage demands a consistent, diversified, customized approach with different policies for different cases. Having recently been awarded by the European Commission with the European Capital of Innovation prize, Lisbon is set to demonstrate the success of its innovative multi-solution approach and is determined to inspire other cities around the globe.