Developer obligations, land readjustment, and strategic land management are used in varying degrees, while infrastructure levies and charges for development rights are rarely used (Table 2.46). Developer obligations aim to compensate the impacts that a land development project has on local infrastructure. Land readjustment is common in land subdivision processes. The infrastructure levy is specific to large public works and adopted on a case-by-case basis. Municipalities rarely adopt charges for development rights, primarily because local laws do not yet enable implementation. The three levels of government make moderate use of strategic land management.

Portugal is a unitary state with a two-tier subnational government structure: 2 autonomous regions and 308 municipalities. The mainland does not have a regional level government, and the two autonomous regions that exist are the overseas islands of the Azores and the Madeira (OECD/UCLG, 2019, p. 396[1]).

The national government and municipalities create the legal framework of land value capture. The national government regulates spatial planning at the local level, notably through the National Programme of Spatial Planning Policy and with basis on the Law 31/2014 (Law of Public Policy on Soil, Land-use Planning and Urban Planning). Municipalities enact Municipal Director Plans, Urban Development Plans and Local Detailed Plans (OECD, 2017, p. 173[2]).

The Law 31/2014 introduced changes to some land value capture instruments and determined the creation of Municipal Funds for Urban and Environmental Sustainability. These changes become operational when municipalities incorporate them into their urban plans and create such a fund. Some municipalities, however, have not yet revised their Master Plans or regulated the new obligations.

The two types of developer obligations in the country are the compensation fee and the urbanisation tax. They are both rule-based mechanisms to charge developers for the impact that a new development or a development at higher density have on local infrastructure. They differ depending on the type of impact, if internal or external to the project. Municipalities commonly implement them and collect the revenues.

The compensation fee, which aims to offset the impact on infrastructure within the project, must be paid through the in-kind provision of land and public utilities (Article 44 of Decree-Law 555/1999). This obligation only applies to land divisions (“loteamentos”) and to edifications with significant urban impact (Articles 44, § 5 and 57, § 5 of Decree-Law 555/1999). Developers must assign areas within the project for green spaces, public utilities and infrastructure and, after that, transfer them gratuitously to the municipality (Article 43 of Decree-Law 555/1999). Alternatively, if the assigned areas are not transferred, the developer will be charged a fee, to be paid in cash or in-kind (Article 44, § 4 of Decree-Law 555/1999). In this case, municipal regulations shall establish the criteria and procedures to define the alternative compensation.

The urbanisation tax is charged to offset the impact on infrastructure external to the project (Article 116 of Decree-Law 555/1999). The fee is paid in cash and is intended to cover part of the costs of public improvements. The basis to calculate the charge is usually the size and type of development, but additional criteria may apply, depending on local ordinance. The urbanisation tax is used in parallel with the compensation fee.

The main obstacles to more widespread use of this tool are the low quality of land registries, the lack of administrative capacities and unclear or complicated calculation formulas. Developers sometimes consider the charges to be economically unfeasible and appeal against their adoption.

Land readjustment is used for the purposes of urban expansion, urban renewal or brownfield regeneration. It was first introduced in 1965, and presently regulated by Decree-Law 555/1999 and Decree-Law 80/2015. Land readjustment projects are initiated by landowners alone or in cooperation with the city council. The national government and municipalities commonly implement or authorise land readjustment projects. Municipalities collect the revenues.

Land readjustment projects subdivide land plots and provide the basic infrastructure for development. Proved ownership of the original area in the official land registry is a pre-requisite. Another important condition is the consent of all involved landowners. If they do not consent, municipalities may carry expropriations of land at market value. Since the required consent level is often obtained, expropriations are not always necessary.

A share of around 30% the readjusted plots is reserved for public improvements, such as green spaces and parks, roads, public utilities and improvements – from which landowners will benefit.

Landowners receive plots located on or as close as possible to their original land, with a value proportional to their original land. Yet, if that is not feasible, they may agree to receive different plots or a residential or commercial unit instead of their original land. The owners will have to agree to a new division, depending on the project. Landowners may exchange reallocated plots for cash. Third party investors, such as developers, can receive readjusted plots in return for their investment.

The challenges to implementation are low levels of technical administrative capacities, low quality of land registries and high costs of expropriations. There are no adequate resettlement alternatives for affected landowners and other affected parties, such as tenants and informal residents. The revenues raised do not justify the costs to pool and readjust land.

The national government and municipalities may create an infrastructure levy to recover the costs of road construction and public utility works. The levy is charged to landowners whose property is adjacent to the public work. The national government and municipalities rarely implement the instrument and collect the revenues.

The levy is to be paid in cash. The fee is typically calculated according to the expected land value gains and a score assigned for each land plot; which takes size, use and price of land, as well as distance to the public improvement into consideration. For instance, the fee for building a bridge between Lisbon and Almada was defined as 60% of the land value gains, calculated as the difference of the market value of land after and before the public work (Decree-Law 46950/1966). The calculation criteria can vary for every public project.

The instrument is used on a single-case basis. Previous legislative authorisation must be given prior to charging each specific contribution. For instance, the Decree-Law 51/1995 created a special contribution for landowners whose land was adjacent to a new bridge constructed over the Tejo River. The special contribution was created only for that major public work and lasted 20 years.

The lack of legal authorisation is a major obstacle to the adoption of the tool. Political will and administrative preparedness must be in place to create a special contribution for every public work deemed to cause land valorisation in adjacent areas. The political and administrative costs of collecting the fee are often higher than the revenues collected.

Developers that comply with land use purposes for public interest are allowed to transfer the density potential of that land parcel to a non-contiguous parcel that is better suited for greater densities. Municipalities rarely use this instrument and collect the revenues. The instrument was introduced in the legal system in 2014, and is yet to be incorporated into local master plans.

Developers may resort to this instrument if their project contributes to any of the following land use purposes: conservation of nature and biodiversity; safeguarding the natural, cultural or landscape heritage; prevention or minimization of environmental risks; rehabilitation or regeneration; adequate endowment of public infrastructures or green spaces; housing for social purposes; and energy efficiency (art. 21, § 1º of Law 31/2014).

As an incentive for complying with land use purposes, the instrument gives a benefit derived from building less than what is allowed. If developers submit a project with a building quota below the basic building quota of the zone, they will receive a certificate of building rights. Using the certificate, they can transfer the unused building rights to other projects, which will then benefit from a higher building quota. The result is that a different project will enjoy extra development rights.

Certificates may be exchanged among developers for a monetary value. However, the instrument itself is not paid for in cash. The certificates can only be used during the planning approval process of a development project.

The main challenges to implementation are unclear land use regulations and the lack of administrative capacities to design and implement the instrument.

The national, regional and local governments acquire and retain lands in advance of needs for urban renewal, land consolidation and control of urban growth patterns. Strategic land management is only moderately used in the country.

The government acquires brownfield land that is abandoned or located on zones of historic preservation. Land is purchased at market price, obtained via transfers from another government entity, expropriated or through the exercise of a preferential right of acquisition.

The acquired land is not usually rezoned or redeveloped before being sold or leased. Although the government holds little land available to lease, they can lease land with the aim of fostering real estate development or development with a public purpose.

Lease length varies according to intended use: for instance, rural lease contracts are signed for at least 7 years, while residential leases under a superficiary right used to be signed for at least 50 years, according to article 19 of Decree-Law 794/76, which was revoked in 2014, and are now defined on a case-by-case basis. The selection of the superficiary tenants must be a public, open call. However, in many cases, it is done directly (ajuste direto), due to the public interest of the activity to be provided.

The ground rent is calculated according to the market value of land. Exemptions to payment may be granted to public or non-profit entities or if the land is destined for public purposes, such as social housing. In practice, many development projects on leased land are considered to be of public interest and therefore are exempt. If the government authorises it, the tenant may transfer or sell the lease in a secondary market.

The obstacles to strategic land management are twofold. First, when acquiring private land, the government often resorts to forcible instruments such as servitudes, expropriation and right of preference, in detriment of less intrusive mechanisms, which tend to be based on strategic planning and incentives. Secondly, there are obstacles of practical order, which include the lack of financing for land acquisition, lack of administrative capacities and lack of co-ordination between public entities.


[3] OECD (2022), “Subnational government structure and finance”, OECD Regional Statistics (database), https://doi.org/10.1787/05fb4b56-en (accessed on 13 January 2022).

[8] OECD (2021), “Subnational government structure and finance”, OECD Regional Statistics (database), https://doi.org/10.1787/05fb4b56-en (accessed on 25 November 2021).

[2] OECD (2017), Land-use Planning Systems in the OECD: Country Fact Sheets, OECD Regional Development Studies, OECD Publishing, Paris, https://doi.org/10.1787/9789264268579-en.

[1] OECD/UCLG (2019), 2019 Report of the World Observatory on Subnational Government Finance and Investment - Country Profiles, OECD/UCLG.

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