Water and land use have changed dramatically over the last thirty years in Southern European coastal zones. For climatic and economic reasons coastal tourism development is often accompanied by simultaneous intensification of agricultural activity. The literature highlights a number of emerging resource pressures. The intensity of land use, excessive infrastructure development, and overexploitation of water resources pose the primary problems. Unsustainable development is often ascribed to mal-performing institutions (e. g., environmental management and land use planning), but there is a lack of studies analyzing the way in which institutions contribute to the problem. We address this gap by devising an analytical strategy that combines function analysis with the analysis of governance structures, property rights, and actors. This strategy is applied to the analysis of changes in ecosystem functions of the Portuguese coastal zone of the Algarve between the mid-eighties and today. Based on the analysis we call for an improvement of the performance of formal institutions in the Algarve. Actors in charge of implementing reformed institutions have to be given the financial and human means to implement formal property rights. Furthermore, entitlements for resource exploitation and interconnected transactions should not anymore be taken for granted. Specifically, institutions to control land use should be made more effective and incentives, that exclusively promote development, such as the construction tax, need to be questioned.
