Housing Crisis Leads to Temporary Pause
The city council of Funchal will suspend the issuance of new short-term rental (Alojamento Local, or AL) licenses for a period of six months. The decision, announced on Thursday, August 7, by Mayor Cristina Pedra, aims to reduce pressure on specific areas of the city and allow time to revise existing regulations.
Suspension Only Applies to Apartment Buildings
The temporary pause will only apply to AL licenses in apartment buildings. Requests for licenses in detached houses or individual rooms will continue to be processed. The measure will come into effect after its expected approval at the next City Council meeting and the Municipal Assembly plenary session in September.
According to the National Registry of Short-Term Rental Establishments, Funchal currently has a total of 3,184 AL units. Cristina Pedra noted this represents around 9,000 beds and 6,000 rooms, with total capacity to host 15,000 guests.
Rules Target Collective Housing Only
The council clarified that the decision focuses specifically on apartments in multi-family buildings, where the impact of short-term rentals on residential life and housing availability is seen as more significant. Detached homes and individual room rentals remain unaffected.
AL Accounts Fpr 25% of Funchals Total Accomodation Capacity
Funchal currently has 3,184 short-term rental establishments registered, representing around 9,000 beds and 6,000 rooms. The mayor noted that AL already accounts for over 25% of the city's total accommodation capacity, a high share considering the limited availability of traditional hotels.
182% More AL Registrations Within 2 Years
Between 2022 and 2025, the number of AL registrations rose by 182%, according to the municipality. Officials see this rapid increase as a sign of growing demand, but also a potential challenge for housing access and neighborhood stability.
The city had previously scheduled a hearing with the involved parties. Today, Cristina Pedra confirmed the inquiry is moving forward and is expected to conclude within two weeks. She stressed that the municipality will hold accountable those responsible for converting affordable housing units into AL properties
Controversy Over Social Housings Turned Into AL’s
The timing of the announcement comes shortly after political controversy over the use of subsidized housing units as short-term rental. The opposition coalition ‘Confiança’ revealed that some units in the “Residências CORTEL I” development - initially designated for affordable housing - are now operating as AL properties.
In response, the City Council rejected an urgent proposal from ‘Confiança’ to revoke the licenses immediately, citing legal procedures that require prior hearings with affected parties. Mayor Pedra confirmed that an internal investigation is underway and is expected to conclude in two weeks.
Regulation Review to Continue Beyond Current Mandate
The city’s leadership intends to move forward with a revision of the AL regulation. However, this process will likely extend beyond the current term of office, which ends in a few months. The goal of the revision is to create stricter limits in neighborhoods experiencing high concentrations of short-term rentals, in order to preserve housing for residents and maintain balance in the local community.
Source: Diário de Notícias Madeira
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