(Bloomberg) -- Some of Portugal’s biggest real estate investors and developers say the government’s plan to stop offering tax breaks to certain foreigners who move to the country may hurt investment and won’t fix the housing crisis, which needs to be addressed with an increased supply of homes.

Prime Minister Antonio Costa said late on Monday that the so-called non-habitual resident regime will end next year for new residents, which can also include Portuguese citizens who have been living abroad. The program has attracted thousands of foreign homebuyers by offering a flat tax rate of 20% on their income, or a 10% tax rate on pensions during 10 years.

“This will squeeze investment and result in a worse housing situation than we already have,” said Claude Kandiyoti, head of Brussels-based family holding company Krest Real Estate Investments, which has invested in hotels, retail parks, warehouses and new residential projects in Portugal for more than a decade.

“I just received more than 30 messages from people all over the world who are reconsidering moving to Portugal,” he said on Tuesday morning.

As home prices soared in cities like Lisbon, the government earlier this year approved an end to the golden visa program for foreign property buyers, as well as a limit on rent increases. Now, Prime Minister Costa plans to end the non-habitual resident program that has so far benefited 89,000 people, according to the finance ministry. The premier said keeping the incentive would extend an unfair tax treatment and help to inflate house prices.

Jose Cardoso Botelho, head of Vanguard Properties, one of Portugal’s biggest developers, says it’s wrong to blame higher real estate prices on foreign buyers as they account for just a fraction of real estate transactions.

“It’s unequivocal that the housing problem lies in the lack of supply, but the legislator insists on trying to reduce demand,” Cardoso Botelho said. “Once again, Portugal reinforces the image of a country with a lack of stability in its laws, one of the most penalizing factors for investment.”

Read more: Runaway Property Costs Push Portugal to End Golden Era of Visas

Social housing in Portugal accounts for just 2% of the total stock, one of the lowest percentages in the European Union. Costa’s Socialist government has already pledged to increase public housing.

Even some real estate investors who agree that the non-habitual resident program is unfair for locals bearing a heavier tax burden say the government won’t solve the current housing crunch just by trying to cool foreign demand.

“In a way, I applaud this idea,” Pedro Coelho, the chief executive officer of Square Asset Management, a real estate investment firm in Lisbon with almost 2 billion euros in property investments, said about Costa’s announcement last night. “But the government needs to increase the supply of homes available in the market if it wants to solve the housing crunch, not block investment.”

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