Lisbon Landlords Challenge Housing Package for Skipping AIMI Tax Relief and Rent Controls

In a pointed critique of Portugal's latest housing legislation, Diana Ralha, director of the Lisbon Landlords Association (ALP), has dismissed the government's new housing package as "insufficient" for failing to eliminate the Adicional ao IMI (AIMI)—a supplementary property tax levied on real-estate portfolios above €600,000—and for leaving untouched pre-1990 rent controls that freeze roughly 100,000 contracts at sub-€130 monthly rents. The public rebuke, delivered to national news agency Lusa, signals rising friction between private owners and policy makers as Lisbon struggles to expand affordable supply without deterring institutional capital.

The disputed bill, sent to parliament under an urgent legislative authorization requested by Prime Minister Luís Montenegro, would trim AIMI only for built-to-rent schemes that commit at least 70% of floor area to "moderate" rents—capped at €2,300 per month—for a minimum 25 years. For existing landlords holding older stock, the tax burden remains intact, a stance Ralha labels a "red line" that could suppress secondary-market investment and perpetuate the very shortage the package seeks to solve.

The controversy centers on Lisbon's central residential parishes—from Príncipe Real to Penha de França—where pre-1990 frozen tenancies coexist with €1 million-plus townhouses sought by foreign buyers. Properties saddled with frozen leases trade at steep discounts because buyers cannot achieve market rents, while AIMI adds an annual 0.7–1% surcharge on tax-assessed values above the threshold, eroding net yields already compressed by caps. For location-specific investment fundamentals, see our Lisbon neighborhood guide.

Political observers expect parliamentary debate to intensify this spring. Should the center-right government concede broader AIMI relief to secure cross-bench support, valuations of legacy rental stock could rise 5–8% virtually overnight as net operating income improves. Conversely, if the bill passes in its current narrow form, investors may accelerate exits from older units, pushing more properties into short-stay licensing or luxury refurbishment schemes—outcomes that would do little to expand long-term affordable supply.

Market Implications for Investors

From an investment standpoint, the package entrenches a two-tier market: newly developed, tax-advantaged stock versus legacy assets still saddled with historic rent freezes and AIMI. Yield-focused buyers calculating five-year IRRs must now underwrite higher exit taxes or longer holding periods for frozen-rent units, tilting capital toward ground-up developments or substantial rehabilitation eligible for the built-to-rent carve-out. According to recent market data, Lisbon prime residential gross yields hover around 3.2%; removing AIMI could add 60–90 basis points to net yields, materially tightening the bid-ask spread on €1–3 million portfolios.

The proposed IVA reduction—refunding the 17 percentage-point difference within 150 days—lowers construction carrying costs but is meaningful only for developers able to pre-sell or pre-lease at "moderate" levels. For small private owners contemplating refurbishment for letting, the cap-ex subsidy is unlikely to outweigh the perpetual rent ceiling, suggesting further deterioration of older housing stock as maintenance incentives weaken. Foreign investors eyeing Lisbon off-plan projects should model exit scenarios both with and without the AIMI exemption to bracket valuation risk.

On taxation, the bill lowers the special IRS flat rate on rental income from 25% to 10% through 2029, provided rents stay under €2,300 per month. While positive, the relief is temporary; if moderate-rent parameters persist beyond 2029, owners could face a 15-percentage-point cliff that would compress net yields overnight. Corporate structures fare slightly better: only 50% of rental income will be assessed for IRC (corporate income tax), encouraging institutional build-to-rent platforms over individual ownership—an unintended consequence that may accelerate portfolio consolidation.

ALP's Advocacy Track Record

Founded in 1977, ALP represents roughly 12,000 small-to-mid-sized landlords across Lisbon and has become a pivotal lobbying voice during each legislative cycle. Under Ralha's leadership since 2021, the association has challenged both left-leaning rent-freeze extensions and market-oriented tax hikes, positioning itself as a defender of property rights while accepting targeted incentives for new supply. Its public approval rating among Portuguese owners stands near 68%, giving its policy critiques weight with centrist lawmakers who may hold the deciding votes on final amendments.

The association's legal arm has successfully challenged municipal fines for short-term rental licensing lapses and is preparing a constitutional case against retroactive rent caps enacted during the pandemic. Investors tracking regulatory risk should monitor ALP litigation; an adverse ruling against frozen rents could release thousands of units to market pricing, repricing the capital value of comparable stock by 15–20%.

Lisbon Residential Tax and Regulatory Climate

Lisbon's housing market operates within Portugal's layered tax framework: municipal IMI (0.3–0.45%), stamp duty (0.8% on purchase), capital-gains IRS (28% for non-residents) and AIMI surcharges (0.7–1% above €600k individual/€1.2m couple). Layered on top are national rent laws that distinguish between pre-1990 "old" leases (lifetime tenure, sub-market resets) and post-1990 contracts (five-year break clauses, market resets). The government now proposes a third category—moderate-rent new builds—eligible for IVA relief, AIMI exemption and IRS reductions, effectively creating a trifurcated market.

Market dynamics supportive of selective investor entry include:

• Institutional Capital Inflows: EU NextGen funds and REITs targeting ESG-certified residential
• Golden Visa Pivot: Qualifying funds still channel foreign equity into qualifying rehabilitation projects
• Scarcity Premium: Lisbon's resident population growth (+3.1% 2019–23) outpacing new completions
• Interest-Rate Plateau: ECB pausing hikes improves debt serviceability for leveraged buy-to-let

Yet structural headwinds persist: construction cost inflation (+12% year-on-year), municipal licensing bottlenecks averaging 18 months, and a constitutional court increasingly skeptical of retroactive rent intervention. Investors must therefore underwrite exit liquidity to domestic institutional buyers rather than relying on individual foreign purchasers who may balk at opaque tenure risk.

Investment Considerations

Buyers seeking exposure to Lisbon's chronic supply shortage should prioritize assets eligible for the tax incentive trifecta—namely plots inside the Second Circular with buildable area exceeding existing FAR by at least 30%. Underwriting moderate rents at €15–18 per square metre still yields 4% net once AIMI is waived, outperforming both government bonds and most Southern European residential plays. Investors must, however, lock in 25-year compliance; early termination triggers claw-backs plus penalties, effectively converting AIMI relief into a contingent liability.

Those targeting value-add within the historic stock should factor in frozen-rent litigation risk and assume no AIMI relief under the baseline scenario. Discounts of 25–35% to comparable free-market units rarely compensate for the decade-long legal horizon required to achieve vacancy, so such acquisitions work only when land-use flexibility (e.g., Mouraria touristic conversion) offers an alternative exit. Foreign buyers unfamiliar with Portuguese lease law should consult English-speaking real estate lawyers before signing promissory contracts tied to existing tenancies.

Portfolio landlords can mitigate AIMI by spreading ownership across separate taxpayer entities, but anti-avoidance rules introduced in 2022 require genuine substance—board meetings in Portugal, local banking, audited accounts. A simpler route is to house assets within a Portuguese REIT (SIGI), where AIMI does not apply at entity level and investors face only standard dividend withholding. Entry valuations inside SIGIs currently trade at 8% discounts to net asset value, offering an additional cushion against capital volatility.

Looking Ahead

Parliamentary committee debates in April will decide whether the government expands AIMI relief to all residential property, a concession that could unlock a wave of secondary-market transactions and accelerate rental supply as owners gain incentive to rehabilitate dormant stock. Even if the carve-out remains narrow, Lisbon's fundamental demand drivers—expanding tech hub, growing tourism workforce and stable euro-zone membership—support a cautiously optimistic outlook for tax-advantaged new builds.

Investors should prepare for a two-stage strategy: front-load capital toward eligible developments during the 2024–26 incentive window, then recycle proceeds into selectively discounted frozen-rent units once legal precedent clarifies de-control pathways. For tailored due diligence and deal structuring, consult realestate-lisbon.com.