AL Local Accommodation: new measures generate a rush for licences in Lisbon

In order to encourage the change of properties from Local Accommodation (known in Portugal as AL or Alojamento Local) to the long-term rental market, António Costa's Government has inserted a series of measures in its "More Housing" package, which has generated controversy in the sector. One of them foresees the suspension of new AL licenses in urban areas until 31st December 2030. These new rules, now under public discussion, are generating a rush for AL licences in Lisbon, which have more than quadrupled in recent weeks and months.

Soon after the Socialist Executive announced the new measures that will touch Local Accommodation, Lisbon City Council noted that licence applications were on the rise. Between 16th February and 7th March, 58 applications were submitted, a number four times higher than in the second half of 2022, when an average of 3 AL licence applications were registered per week, according to the Portuguese newspaper ECO.

What are the new measures that affect Alojamento Local in Portugal?

According to the draft law on AL, the Portuguese Government proposes to:

• Suspend the issuance of new Local Lodging licences until 31 December 2030, with the exception of zones for rural accommodation. It then further proposes that registrations issued on the date the new rules come into force will expire in 2030, renewable for five years thereafter.
• Extraordinary contribution for Residential Property (rate applicable to the taxable base will be 35%);
• AL no longer benefits from the reduction in the age coefficient that accompanies the age of the property. This means that local accommodation located in old buildings risks paying more IMI property tax;
• Condominiums will now be able to cancel rental property registrations if more than half of the building decides to do so;
• Homes currently in rented accommodation that enter the rental market by 2024 will have IRS exemption on rents until 31st December 2030.

As if this wasn't enough, Lisbon City Council has also presented its proposal for the revision of the Municipal Regulation on Local Lodging (RMAL), in which it wants the new limits of accommodation to be defined by the borders of its 24 parishes. And it also wants to reduce the ratios between AL and dwellings, with relative containment zones being reduced to 5% and absolute containment zones to 15%. Note that, today, new AL registrations are suspended in 15 of its 24 parishes by decision of the Municipal Assembly.

Why is there empty Local Accommodation in Lisbon and Porto?

The rush for Local Accommodation licences in Portugal after the announcement of new restrictions to the sector is not a new movement. The same has happened at other times in the history of AL, namely after the limitations announced in 2022. It happens that many owners rush to not lose the chance to do business in the tourism sector, but then do not exploit the properties for tourism purposes. This is exactly why, today, there are at least 5,000 inactive local lodgings in Lisbon and Porto.

Of the approximately 30,000 local lodgings that exist in Lisbon and Porto:

• 3,500 units are empty in Lisbon, being considered "ghosts" by the Lisbon municipality itself;
• 1,912 establishments are inactive in Porto.

Given the current number of empty ALs and knowing that around 70% are located in residential buildings, Eduardo Miranda, president of the Association of Alojamento Local in Portugal (ALEP), says he sees "no problem in them moving to the long-term rental mode", since they are also not serving tourism, cites the Jornal de Negócios. The problem is that whoever does this loses their accommodation licence.