May 7, 2020 / 9:23 PM / 19 days ago

Portugal extends contracts, housing tensions intensify during pandemic

LISBON (Reuters) - In a move aimed at ensuring people had a roof over their heads for the duration of the coronavirus outbreak, Portugal’s government on Thursday extended a measure stating contracts could not expire or be cancelled to the end of September.

FILE PHOTO: People walk a street as the spread of the coronavirus disease (COVID-19) continues, in downtown Lisbon, Portugal April 30, 2020. REUTERS/Rafael Marchante

But housing associations fear the move fails to tackle their key concern with the country’s emergency housing schemes during the pandemic: rising tensions and accumulating debts by tenants to landlords.

The measure, in place since mid-March and originally due to expire next month, prevents landlords from terminating lease agreements if the tenant does not agree to it and from kicking out renters even if their contracts are due to run out before Sept. 30.

In April, Portugal also suspended rents for vulnerable households and cash-strapped small firms until a month after the lockdown declared on March 18 was lifted, which happened on May 3.

Renters are then expected to repay what they owe in monthly installments for up to a year.

But policies based around accumulating debt could turn into a ticking time-bomb given incomes are highly unlikely to recover in time for tenants to be able to afford their obligations.

Portugal’s once bailed-out economy is expected to contract by 8% this year, and unemployment to more than double to 13.9%, according to the International Monetary Fund.

“It is not certain when people will recover because the lockdown might end but the economic crisis is here to stay,” said Rita Silva, of housing association Habita.

And while the government opened applications on April 15 for a state loan to pay rent, diverting debt from landlords to the state, just 1,085 people have applied so far, according to the government institute managing the loans.

The head of Portugal’s Landlords Association, Iolanda Gavea, blames low uptake on the fact that policies passed before loans were made available had already incentivised people to stop paying, as many have done.

“Making landlords deal with the short-term loss of income and long-term risk is pushing the social obligations of the state onto us,” Gavea said.

Many of those hardest-hit by the crisis are also undocumented and seasonal workers lacking the paperwork to back up an application for a government loan.

“We don’t have the documents for these schemes, and we don’t want to ask our employers or landlords because we fear they will kick us out when the pandemic is over if we make them pay,” Nabin Bhatarrai, a 27-year-old migrant from Nepal living in Lisbon, said.

“I owe 300 euros next month, and I don’t know how I’ll pay it, not if I buy food.”

Around 25% of the housing market consists of renters, mostly the young or elderly people on low incomes.

A study conducted in February 2020 showed Lisbon tenants spend a staggering 60% of their salary on rent, above other cities known for experiencing gentrification such as Barcelona or Berlin.

The Renters Association is receiving six times more calls for help from tenants in disputes with landlords over pay since the beginning of the pandemic.

Evictions were also suspended until June 30 but, despite the measure, Vasco Barata, from housing association Res do Chao, said some cash-strapped tenants with no written contracts and little knowledge of their rights are already being pressured to leave their homes.

“The government’s response should focus on ensuring people are able to pay rent so that they do not risk losing their homes,” Barata said.

Reporting by Victoria Waldersee and Catarina Demony in Lisbon; Editing by Andrei Khalip and Matthew Lewis

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