Can more housing supply improve affordability? A subnational perspective from Portugal

Diogo Ribeiro, Hugo de Almeida Vilares and Luís Carvalho

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We investigate the impact of housing supply on affordability in rapidly appreciating sub-national markets in Portugal. Our spatial econometric model confirms a negative relation between housing stock and prices, yet predicts that, on average, maintaining the construction pace of the 2000s would lower prices by only 3%, while doubling it would bring a 6% reduction. We also find significant price impacts from short-term rentals and international demand. Simulations indicate that a policy mix combining moderate supply growth with sensible limitations in those domains could more effectively alleviate affordability pressures in high-demand regions, bringing spatial nuance to the “supply skepticism” debate.

Keywords: housing affordability; supply skepticism; short-term rentals; tourism; spatial spillovers (search for similar items in EconPapers)
JEL-codes: R21 R23 R31 R38 (search for similar items in EconPapers)
Date: 2025-12-10
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Published in Regional Studies, 10, December, 2025, 59(1). ISSN: 0034-3404

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