Inflation is driving more and more unexpecting people into poverty. The Austrian People’s Party (ÖVP) and the Greens nevertheless refuse to take action against the skyrocketing prices. The Portuguese government shows that there is another way: it already capped rents last year. Recently, Portugal has started renting out vacant flats and suspended VAT on 44 basic foodstuffs.
Between 2017 and 2022, rents in Portugal increased by 42 percent. The country is one of the poorest in Western Europe. Although the government only raised it in December, the minimum wage is just 760 euros a month. More than half of workers earn less than 1000 euros per month.
The government led by socialist Prime Minister António Costa has implemented restrictions on rent increases. Landlords are allowed to raise rents by a maximum of two percent. Costa’s next plan is to make approximately 730,000 empty apartments available for rent. If a flat remains unoccupied for over two years, Portugal will take measures to ensure it is rented out.
Putting vacant flats on the market
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Austria: ÖVP & Greens fueling inflation instead of relieving the burden on tenants
In Austria, the circumstances are distinct. The government also deliberated on implementing a rent control measure in late February. Ultimately, however, the ÖVP and the Greens decided to provide a subsidy for housing expenses. While a lump sum of 250 million euros will be distributed, the rents will either stay the same or continue to increase in the future. Additionally, the housing cost subsidy ultimately returns to the landlord after the rent is paid. In February, Austria experienced an inflation rate of 11 percent. As a result, tenants not only face elevated costs for energy and electricity like everyone else, but also encounter higher rental fees.
Gabriel Felbermayr, the leader of the Economic Research Institute (Wifo), also expresses disapproval of the government’s strategy. “I believed it was evident by now that increasing cash transfers can alleviate social difficulties, but they do not reduce inflation; in fact, they contribute to its rise,” Felbermayr stated. The government does not possess these 250 million euros and must borrow them from the financial markets. When new money is injected into the economy, it results in higher prices, according to Felbermayr. He believes that implementing rent control was a method to escape the escalating prices.
Portugal suspends VAT
The Portuguese government, however, is not only selling empty apartments but also controlling increasing inflation by temporarily halting VAT. Currently, VAT on 44 essential food items will be suspended for six months, with the possibility of extending this timeframe if necessary. This action is a result of an agreement with producers and retailers to stabilize prices promptly. Additionally, the government plans to provide financial assistance to farmers and livestock within this context. The suspension of VAT will lead to reduced prices and increased affordability of items such as bread, eggs, meat, oil, yogurt, fish, and cheese for Portuguese households.
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