This paper examines the role of ‘urban rehabilitation societies’, a legal and institutional framework launched by the Portuguese government in 2004 and implemented locally ever since. The paper discusses how this model has provided an alibi for neoliberal narratives, grounded on the virtues of the market and on market oriented strategies. The research methodology uses a combination of qualitative documentary analysis and face to face interviews with government officials and public officers to scrutinize the effects of policies on issues of governance and housing affordability. Many cities throughout the world struggle with the problem of how to rehabilitate urban areas without displacing lower income residents. This pa per explores how this question has been addressed within the context of a new wave of urban rehabilitation initiatives operating in Portugal since 2004. Framed by a new institutional framework designed to boost housing requalification the Urban Requalifi  cation Societies (SRU in the Portuguese acronym) have come to consolidate an approach comprising privatization, deregulation, and marketization in the context of public/private partnerships. Given that the historic centres of Porto and Lisbon are dominated by the private rental sector which, owing to strict rent controls that protect tenants’ rights, are characterized by low rents but poor housing quality, this paper aims to scrutinize the effects of such a model of urban rehabilitation on housing market trends, namely changes of tenure and housing affordability provision. Considering that the new model was launched during an era of public sector retrenchment and the predominance of neoliberal ideas, which in Portugal followed a period of high and persistent unemployment, and bearing in mind Portugal’s burden of private and public debt, we aim to assess the impact of this model on modes of local governance in Porto and Lisbon.