Lisbon Is Thriving. But at What Price for Those Who Live There?

LISBON — Not long ago, Portugal’s capital, Lisbon, was a backwater of Europe. Its historical center was dotted with decrepit and semi-abandoned buildings. Some downtown squares were the domain of prostitutes and drug dealers. The city served as a display case for the devastation of Europe’s debt crisis.

Then, in 2011, the country embarked upon a series of difficult steps in return for an international bailout of 78 billion euros, or $92 billion, among them a new rental law that liberalized the capital’s housing market.

Today the city is booming. Tourists stream off cruise ships to fill its squares and ride tuk-tuks up and down the hills. Historical buildings now gleam. New bars and restaurants throb with life.

But who has gained and who has lost in Lisbon’s revival has become a divisive issue for residents, and for Europe, as the continent finally emerges from the lost decade of its economic crisis to see what it has wrought.

Portugal has been a prime exhibit of Europe’s economic recovery. Unemployment has been halved. Exports are booming. Foreign investors have flooded Lisbon. The country even provides buyers of properties worth €500,000 or more the chance for a “golden visa” to reside there.

Yet the monthly average wage is still roughly €850. Market liberalization, combined with a huge influx of foreign money, has helped raise property prices in central Lisbon 30 percent in two years.

“Portugal’s strategy to exit the crisis was all about attracting foreign investment, which solved a major financial problem but is also now creating new issues for our people, like this housing crisis in Lisbon,” said Ana Drago, a former lawmaker and a researcher in urban studies at the University Institute of Lisbon.

The revival of Lisbon feels to many less privileged residents who are being displaced like an abrupt swing from one extreme to the other. On some streets both extremes live side by side.

In the medieval neighborhood of Mouraria, a luxury condominium is being built a few yards away from a renovated building that has become a second home for French and other foreign investors.

At the end of the block, an aged building with narrow balconies has turned into a symbol for Portuguese activists fighting housing evictions, a new phenomenon here. Opposite the house, residents who won a lengthy legal battle to stay have hung a Santa Claus, surrounded by signs showing their Christmas wish-list: affordable housing and social equality.

No doubt, most Portuguese, led by those who own real estate, consider Lisbon’s transformation to be an essential part of Portugal’s recent economy recovery.

The arrival of deep-pocketed investors and celebrities like Madonna is “creating housing problems in a few neighborhoods,” said Luís Correia da Silva, a director of Dom Pedro, a resort and hotel company.

“But people shouldn’t forget that nobody wanted to do anything to save these same neighborhoods a few years ago,” he added.

In 2010, my first article for The New York Times in Lisbon focused on Portugal’s antiquated tenancy rules, which could leave a landlord renting two identical apartments in the same building, but one for less than 3 percent of the other’s price.

Portugal had a long history of antagonism toward landowners, dating back to the 1910 revolution that ended the monarchy. Then, during a long military dictatorship, rents were frozen in Lisbon and the northern city of Porto.

Fixed rents for new contracts were abolished more than a decade after another revolution, which overthrew the dictatorship in 1974 but not for existing contracts, and downtown Lisbon remained a partly derelict area shunned by locals.

When Portugal received its bailout, the inner city had 552,700 inhabitants and 322,865 housing units, of which 50,289 stood vacant, according to the most recent census of 2011. A year later, the new rental law came into force that liberalized the housing market.

Politicians sought to lead by example. In 2011, António Costa, who was then mayor of Lisbon, moved his city hall administration from its historic headquarters to a former tile factory building at the corner of Intendente, a square known for drugs and prostitutes.

Mr. Costa is now Portugal’s prime minister and Intendente is almost unrecognizable. It has a handicraft shop, cafes and several construction projects in the works. In the center stands a garden, surrounded by red forged-metal barriers designed by Joana Vasconcelos, one of Portugal’s best-known artists.

Asked about Lisbon’s transformation, Ms. Vasconcelos said that “the city is changing fast, but for the better.”

“My impression is that Lisbon is getting back to what it used to be, because this was a multicultural city for centuries, a trading center that was connected to the world,” she said. “During a dark period of dictatorship, we lost our way but we’re now back on track.”

But there’s a sad flip side to almost every happy story about Lisbon’s fortunes.

Rodrigo Azambuja used to weave traditional Portuguese carpets. In 2013, his landlord raised his rent from €300 to €1,200. A few months ago, the landlord told him he needed to be out in July.

By August, however, Mr. Azambuja should start getting rental income from a property he bought two years ago, in one of the auctions of derelict buildings held by the city. Rather than making carpets, he will soon be serving wine in a bar that he will open on the ground floor.

“I guess that I’m really living both sides of this story,” Mr. Azambuja said. “To me, the only real drama is that all this change is happening so fast, in a kind of perfect storm, for which many people were completely unprepared.”

Luis Mendes, an urban geographer, is a member of a citizens’ platform called Morar em Lisboa (Living in Lisbon) that has been fighting to halt housing evictions. He worries that Lisbon risks “killing the golden goose” that has made it so attractive to visitors.

“If we’re evicting the old residents and creating gated communities for the wealthy, then what are we going to show tourists who expect to see traditional Portuguese life on our streets?” he asked.

Some residents complain a dual economy has emerged, split between those who deal in property and tourism — and the rest. They also decry the “Disneyfication” of Lisbon, which they see in new shops, like “The Fantastic World of the Portuguese Sardine,” where tourists can buy a can of fish with their birth year on the label.

Lisbon’s 4.5 million of annual visitors now outstrip the city’s population by a ratio of more than eight to one. About 30 hotels are scheduled to open in Lisbon in the coming year.

The housing squeeze in Lisbon, as well as in Porto, is becoming a political issue for the Socialist minority government of Mr. Costa, who has relied on the support of Communist and other far-left lawmakers to stay in office since 2015.

Far-left politicians want to tighten laws to stop evictions and protect tenants, including those who are over 65 and have lived in their property for more than 25 years.

While rules already exist to protect older residents, they are not ironclad.

After her husband died, Maria Teresa Alves Ramos Mendes, a 79-year seamstress, was told by her landlord that the rent on the apartment where they had lived for more than 30 years would increase several-fold.

She consulted lawyers, who warned that she could lose a costly court battle. So she abandoned the place.

“I really thought that at my age there was no way that I could be forced out of my home, but I was sadly wrong,” she said.

She now lives with her daughter on the outskirts of Lisbon, but the short-term rental market aimed at tourists and developed by companies like Airbnb is spreading even there.

Life in upmarket neighborhoods is being hollowed out. In November, André Júdice Glória, a Portuguese lawyer, moved into a new apartment with his wife and two children, in a renovated six-story building.

Three Brazilians and two Angolans own the other apartments, but Mr. Júdice Glória said he barely sees them.

“It’s a first-world problem, but of course this building feels very empty,” he lamented. “It would have been nice to have some other families around us, people with a real stake in the day-to-day issues of living here.”

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