Early evidence on the impact of Portugal's youth housing policy

In August 2024, the Portuguese government introduced youth-targeted housing measures to support first-time homebuyers under 35 years old. This dissertation assesses the effectiveness of these policies - namely tax exemptions on Stamp Duty (IS) and Municipal Property Transfer Tax (IMT), alongside a co-financing scheme - by combining survey data with a simulation of Lisbon’s housing market. Using 357 valid survey responses, willingness-to-pay (WTP) distributions were estimated and market equilibria simulated with and without the subsidy. Results reveal that while the policy modestly increased the number of young buyers (from 89 to 95), only 6.3% of beneficiaries were marginal buyers who could not have purchased otherwise. Scaled to Lisbon Metropolitan Area data, an estimated €244.6 million in subsidies were allocated inefficiently, as the majority of recipients would have entered the market without government support. The findings show that demand-side subsidies, when applied in markets with inelastic supply, have limited impact on youth homeownership and risk contributing to price inflation. The analysis underscores the need for complementary supply-side measures to improve affordability and ensure more efficient use of public funds.