The main square of the historic Alfama district in Lisbon, Portugal, fills with the sounds of fado music as women sell traditional cherry liqueur in tiny chocolate cups.
The festive atmosphere here draws packs of tourists to this area of the country every year.
But activists say that iconic neighborhoods like Alfama have been threatened largely because of the government’s golden visa program for foreign investors.
“I'm afraid that this neighborhood is dying a little bit every day. I'm very afraid of that."
“I'm afraid that this neighborhood is dying a little bit every day. I'm very afraid of that,” said Luis Mendes, a geographer who studies housing at the University of Lisbon.
Mendes blames it in part on the country’s golden visa program under which foreigners have flocked to invest in Portuguese properties and businesses in coastal cities such as Lisbon and Porto.
Portugal’s golden visa program began in 2012 to attract foreign investors. It was part of a package of incentives to rejuvenate the Portuguese economy following the 2008 global financial crisis.
Under the program, golden visa holders can become permanent residents in Portugal if they invest a minimum of between $294,000 and $525,000 in real estate, depending on location and rehabilitation costs. Golden visa holders must spend at least seven days in Portugal for the first year and 14 days every two years after that. After five years, they can become citizens. Foreigners who live in Portugal less than six months a year can do so tax-free.
In January, to relieve the pressure in popular coastal cities like Lisbon and Porto, the government changed the golden visa program so that foreigners can no longer qualify for the visa with a coastal residential purchase. However, properties in Portugal's interior, which have been less popular with investors and tourists, still qualify under the new guidelines.
So far, Portugal has issued more than 10,000 golden visas in exchange for $6 billion in investments, sparking a boom in real estate development and tourism.
People like Mendes say the visa program has been a double-edged sword.
“We have all the employment created, all the economy boosting. We have an enormous amount of rehabilitation work being done in the neighborhood,” Mendes said.
Mendes pointed out a late 19th-century mansion decorated with traditional blue and while porcelain tiles located on Rua Remedios, one of Alfama’s main streets. He said the building was purchased by Chinese investors and converted into luxury apartments. But the building is currently sitting empty, he said, adding that many of the area's buildings have been converted to short-term tourist rentals surrounded by conveniences that cater to them.
“What you see is souvenir shops and bars and the art gallery. Which is good. But it's all that we have here in Alfama. And the grocery store, the bakery, the butchery disappeared. And that's a very high impact for the inhabitants,” he said.
By January, real estate values were already up by more than 50%. The average rent in Lisbon is now nearly $1,000 a month.
But Portugese developers and real estate investors have denied that the golden visa program alone has inflated home prices, claiming that other factors like high taxation and antiquated housing legislation have contributed to the housing crunch in coastal areas.
There are also other factors pushing out locals.
When the golden visa program began in 2012, the government also ended rent control, allowing property owners to raise rental prices and evict those who can not afford the new rates.
Rita Silva, a housing activist with the organization Habita, said housing and rental prices have risen to levels beyond reach for many of Lisbon’s Portuguese residents.
“For us, it's stratospheric prices. It’s not prices that we can afford."
“For us, it's stratospheric prices. It’s not prices that we can afford,” she said.
A big part of her job is helping local residents fight eviction orders. She said she’s handled dozens of those cases since the golden visa was implemented.
"We are seeing more and more middle-class [people] that were all OK. They were living in the rental house and quiet and they thought they were going to live in that house for the rest of their lives in peace. And now, they don’t because rents are increasing, contracts are being interrupted and they don't have alternatives,” she said.
Irene Costa, 69, is facing eviction after 50 years in the same apartment building at the back of a quiet courtyard in the Alfama district. As a retired house cleaner, she shares her tiny one-bedroom apartment with a black cat. The apartment is crammed with her belongings.
She said her problems started when her original Portuguese landlord died. The current owner, an investor from Brazil, wants her out so he can sell her unit.
Costa lives on a pension of $300 a month and said she doesn't have the kind of money needed to purchase the unit or to rent it under the new owner. She said that she doesn’t know where she’ll go.
She said it’s an agonizing situation and that sometimes she feels betrayed.
Mendes said one quarter of Alfama residents have either moved or been evicted in the last decade.
Sara Paixao grew up in the area, and still works as a waitress here. She said she welcomes tourists and foreign residents but misses the old neighborhood — she remembers playing with her cousins and brothers in the streets.
Paixao said that today, everything is more expensive and most of her neighbors are gone.
“It’s sad. I think it’s sad. Because the neighborhood lost the magic of the people.”
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