Old Rents and AIMI Still Unresolved: What Expats Living in Portugal Need to Know About the New Housing Measures

 

 

 

For many expats living in Portugal, the property market can feel confusing, unpredictable, and at times legally intimidating. Between complex tax rules, frozen old rental contracts, and additional property taxes such as AIMI, it’s not always clear where opportunities end and risks begin.

Expats arriving in Portugal often underestimate how uniquely complex the local property tax and rental systems are — particularly AIMI and pre-1990 frozen rents. Without clarity on these rules, what seems like a promising investment can quickly turn into an unexpected financial burden.” — Susana Wichels, Co-CEO, C1 Broker

The Portuguese Government recently announced a new housing package aimed at improving supply through fiscal incentives, tax reductions, and support for long-term rentals.

But key structural problems remain unresolved, especially the AIMI property tax and the long-standing issue of rents frozen before 1990. These unresolved issues continue to affect landlords, investors, and ultimately tenants — including many foreign residents.

In this article, we explain what this new housing package really changes, what problems remain untouched, and how expats living in Portugal can protect their investment, income, and property with the right legal and insurance support.

 

 

 

 

What the Top Housing Market Sources in Portugal Are Saying

Across the most authoritative Portuguese real estate and economic platforms, a consistent message emerges: while the new housing package offers some fiscal relief, it fails to address the core obstacles that continue to limit housing supply. Leading property associations, economic analysts, and real estate portals agree that the Additional Municipal Property Tax (AIMI) remains one of the most damaging barriers to investment confidence.

“Understanding local tax structures and rental regulations isn’t optional for foreign property owners — it’s essential. Professional advice before you buy, rent or insure a property can be the difference between confidence and costly surprises.” — Susana Wichels, Co-CEO, C1 Broker

Experts highlight that the Government’s exemption for AIMI applies only to highly specific long-term rental development projects under the “built-to-rent” model. These projects must allocate most of their surface area to homes at controlled prices. In practice, this applies to a very small segment of the market and excludes most private landlords — including international property owners and expats living in Portugal who own one or two rental units as an income supplement.

Another major concern frequently highlighted is the persistence of frozen rents from contracts signed before 1990. These old agreements often generate monthly rents far below market value while owners remain fully responsible for maintenance, taxes, and structural safety. Analysts consistently point out that this discourages property rehabilitation and keeps many buildings in poor condition, particularly in older urban centres.

Finally, while tax incentives such as reduced VAT on construction and exemptions on capital gains reinvestment are welcomed, most specialists agree that these measures alone will not resolve the deep structural imbalance between housing supply and demand. Without addressing AIMI and frozen rents, experts warn that market confidence will remain fragile — especially among foreign investors unfamiliar with Portuguese property regulations.

 

 

 

 

AIMI: Why This Tax Still Blocks Investment for Expats Living in Portugal

For many expats living in Portugal, AIMI is one of the least understood — and most shocking — property taxes they encounter. Unlike standard municipal property tax (IMI), AIMI applies to higher-value properties and can significantly increase annual ownership costs.

The new housing measures introduced by the Government keep AIMI largely untouched. Only large-scale long-term rental development projects with controlled pricing may qualify for exemption. This means that most private landlords — including retirees, digital nomads, and families renting one or two properties — remain fully exposed to AIMI.

From an expat perspective, this creates a serious financial planning risk. Many foreign buyers purchase property based on rental yield projections, unaware that AIMI will substantially reduce profitability. When combined with rising interest rates, maintenance costs, and insurance expenses, the tax can quickly erode expected returns.

“Many of our clients come from tax systems where clarity and predictability are the norm. In Portugal, however, hidden liabilities like AIMI and frozen rent contracts can quietly erode returns if not properly anticipated and insured against.” — Susana Wichels, Co-CEO, C1 Broker

The result is hesitation. Some expats delay purchasing, others sell prematurely, and many avoid reinvesting in property upgrades. This ultimately reduces the quality and availability of housing stock for tenants — including other expats living in Portugal searching for stable long-term accommodation.

AIMI remains one of the main reasons why professional advice before buying property is essential. Understanding how taxes interact with rental income, capital gains, and ownership structures is critical to avoiding costly surprises.

 

 

 

Old Rents Frozen Since 1990: A Silent Crisis in the Property Market

Another unresolved structural issue affecting the housing market — and indirectly affecting expats living in Portugal — is the continuation of frozen rental contracts dating back to before 1990. These contracts often generate symbolic monthly rents that are completely disconnected from current market realities.

For property owners, this creates a dangerous imbalance. Taxes, repair obligations, insurance premiums, and building compliance costs have all risen sharply over the years, while income remains practically unchanged. Many landlords are financially unable to refurbish buildings, improve safety standards, or modernise units.

For expats, this has two direct consequences. First, many older buildings remain unavailable for the rental market due to financial unfeasibility. Second, urban regeneration slows dramatically, reducing the number of safe, modern homes available in central areas.

Generic insurance policies simply aren’t enough for expats here. You need someone who understands Portuguese property law, speaks your language, and can anticipate where tax, legal, and insurance risks intersect.” — Susana Wichels, Co-CEO, C1 Broker

This frozen rent system also discourages younger investors — both Portuguese and foreign — from entering the market. Without predictable returns, long-term investment becomes a high-risk strategy.

In practical terms, this means continued pressure on available housing stock, rising rental prices in the free market, and increasing competition among expats living in Portugal for quality housing.

 

 

Tax Incentives Exist, But Structural Problems Still Dominate

The Government’s housing package does introduce several tax incentives aimed at stimulating construction, rehabilitation, and affordable rentals. These include reduced VAT on certain renovation works, exemptions from capital gains tax when profits are reinvested into rental property, and lower tax rates for landlords offering regulated rental prices.

While positive, most of these incentives apply only within strict financial thresholds — such as monthly rents capped at €2,300 or property sales under predefined limits. For many expats living in Portugal, especially those purchasing in Lisbon, Porto, or coastal regions, these ceilings are often unrealistic given current market values.

Corporate investors also receive certain corporate tax benefits, but again, these apply primarily to large-scale developments rather than individual property owners.

The result is a system that appears supportive in theory but remains highly restrictive in practice. Small and medium landlords — including expats with modest property portfolios — remain excluded from meaningful relief.

Without addressing AIMI and frozen rents, the effectiveness of these incentives is fundamentally weakened. The structural imbalance between supply and demand persists, maintaining pressure on prices and limiting investment confidence.

 

 

 

Why Expats Living in Portugal Must Work With a Specialist Insurance Broker

 

For expats living in Portugal, property ownership and rental activity come with legal, financial, and insurance risks that are very different from those in the UK, Ireland, Germany, or the USA. Navigating taxes like AIMI, frozen rental contracts, condominium liabilities, tenant risks, and property damage exposure requires expert local knowledge.

At C1 Broker, our philosophy is always ‘Customer First’. We don’t just sell insurance — we build long-term protection strategies that give property owners true peace of mind in an unfamiliar market. — Susana Wichels, Co-CEO, C1 Broker

This is exactly why working with a specialist broker like C1 Broker is not optional — it is essential.

A generic insurance policy is not enough. You need:

• A professional who understands Portuguese property law

• Someone who can explain every clause in your own language

• A broker who knows which insurers truly protect landlords

• A specialist who can anticipate tax and legal exposure

• A team that supports you throughout claims, not just at the sale

Whether you rent your property, use it as a holiday home, or live in it full time, having the correct home insurance in Portugal is fundamental to protecting your investment. At C1 Broker, we work exclusively with insurers experienced in covering foreign property owners.

You can explore our specialised House Insurance for Expats in Portugal here:
https://c1brokers.pt/en/house-insurance-in-portugal/

For expats living in Portugal, professional advice is the difference between security and costly mistakes.

 

Conclusion

Despite the Government’s attempt to stimulate the housing market through tax incentives, two of the most damaging structural issues — AIMI and frozen rents prior to 1990 — remain unresolved. These factors continue to suppress investment, limit housing supply, and create financial uncertainty for property owners.

“For expats, understanding local rules is not optional. Professional insurance and local expertise aren’t just nice to have — they’re essential elements of a sound property investment strategy.” — Susana Wichels, Co-CEO, C1 Broker

For expats living in Portugal, this reality reinforces one key truth: understanding local rules is not optional. Property ownership requires proper tax planning, legal awareness, and above all, professional insurance protection tailored for foreigners.

If you are an expat living in Portugal and you own, rent, or plan to invest in property, protect yourself properly from legal, tax, and financial risk.

Calculate your house insurance now with C1 Broker and receive expert support in your language:
https://c1brokers.pt/en/house-insurance-in-portugal/

Our team specialises in protecting expats living in Portugal with fully tailored, transparent, and secure insurance solutions.