Greece considers new tax incentives to boost private investment in affordable housing

The proposal is based on providing financial and tax incentives to property developers in exchange for their commitment to constructing and making residential properties available exclusively for long-term rental, with rents capped at 25%–30% of tenants’ net income.

“Today, there is no appropriate legislative framework in place to make affordable housing viable,” Mr Andriopoulos stated, explaining that high construction costs make it difficult to offer newly built homes at affordable rental rates without compromising the financial viability of investments.

He also revealed that discussions with the government on the development of the new framework are already underway, expressing hope that the matter will be resolved within the coming months.

Reduced VAT in Exchange for Affordable Rents

The proposal differs from existing rent subsidy schemes and housing purchase support programmes involving subsidised low-interest loans, as its primary objective is to increase the supply of newly built apartments.

At the heart of the proposal is the reduction of residential development costs through targeted tax incentives.

Among the measures under consideration is a reduction in VAT on construction, with a proposed rate of 6% instead of 24%, alongside additional tax relief for investments meeting specific affordable housing criteria.

In return, investors would be required to keep the apartments available on the rental market, with individual unit sales prohibited throughout the agreed commitment period.

“Affordable housing development, which is distinct from social housing, should be exclusively rental-based, targeted at private individuals and should not involve rent subsidies,” the head of DIMAND emphasised.

The proposed model would involve lower returns for investors during the initial period, with projects expected to reach financial maturity over a period of 10 to 15 years.

Portugal and Spain Offer Examples of Affordable Housing Incentives

Similar mechanisms are already in place in Portugal, where the Programa de Arrendamento Acessível (Affordable Rental Programme), introduced in 2019, provides tax advantages to property owners who offer homes at rents below specified market thresholds.

Under the original scheme, qualifying rental income could be exempt from income tax, subject to compliance with eligibility criteria and minimum rental commitment periods.

In parallel, Portugal has introduced specific tax provisions for eligible residential construction and refurbishment projects intended for affordable rental purposes.

In Spain, the development of affordable rental housing is supported through a combination of public land, private investment and rental price restrictions.

A notable example is the Madrid regional government’s Plan Vive, under which public land is made available to private companies for the construction and management of residential properties with regulated rents.

The agreements can run for up to 50 years, allowing investors to recover their initial investment through long-term rental income.

The provision of public land reduces the initial capital requirements, while private investors assume responsibility for the construction, financing and operation of the housing developments.