When the sun finally set on the long-standing Pinel tax incentive at the end of December 2024, France’s property market was left standing in an unfamiliar shadow. For more than a decade, the Pinel scheme had offered private investors a significant carrot: tax deductions in exchange for buying new-build properties and renting them out at controlled rates to tenants with moderate incomes. For many investors, it was the fiscal sweetener that made real estate a lucrative long-term play. But once that scheme was retired—with no immediate successor—something gave way.
Just a few months into 2025, the numbers began to tell a stark story. The French Federation of Property Developers (FPI) reported a dramatic 41% plunge in new housing purchases made for rental purposes during the first quarter alone. The message was clear: without tax breaks, many private investors are simply walking away from the new-build market.
And yet, in the void left by Pinel, a quieter opportunity has started to make noise—one that has technically existed for years but is only now stepping into the spotlight for individual investors. It’s called the Intermediate Rental Housing scheme, or Logement Locatif Intermédiaire (LLI). And it might just be the property market’s best-kept secret.
A Bridge Between Two Worlds
Originally conceived more than a decade ago, LLI was designed to fill a gap in France’s housing ecosystem—a gap that continues to widen. On one side is social housing, accessible only to those with the lowest incomes. On the other is the private rental market, where prices in urban centers have climbed to dizzying heights. In between lies a growing segment of the population: working and middle-class households who earn too much to qualify for subsidized housing, but not enough to comfortably rent at market rates.
Enter the LLI: properties specifically offered to this middle-income bracket at rents that are 10% to 15% below prevailing local prices. The catch? Until very recently, only institutional investors—think real estate companies and large-scale developers—were allowed to invest in these properties.
That changed with the 2024 Finance Law, which opened the LLI framework to private investors for the first time. And while the model carries a few bureaucratic hurdles, the financial incentives may prove too attractive to ignore.
From VAT Relief to Long-Term Tax Breaks
At first glance, the LLI model may look like a classic build-to-rent scenario. But a closer inspection reveals significant perks designed to woo hesitant investors.
The biggest draw is undoubtedly the tax advantages. When purchasing a new LLI property, investors benefit from a reduced value-added tax (VAT) rate of just 10%, compared to the standard 20% applied to typical new-builds. That alone can shave tens of thousands of euros off the purchase price.
Take, for example, a two-bedroom flat in Zone A—a classification reserved for high-demand urban areas like Paris, Lyon, or parts of the French Riviera. With a market price of around €318,000 under the usual 20% VAT, the same property would cost just €291,000 when purchased under the LLI program—a discount of €26,500 right off the bat.
Add to that a tax credit designed to offset property tax for the next 20 years, and the savings only grow. According to estimates from real estate developer Icade Promotion, this credit could be worth up to €14,110 over two decades.
While the LLI model may not offer the headline-grabbing tax deductions of the old Pinel regime, the combination of lower upfront costs and ongoing fiscal relief provides a compelling alternative.
The Catch: Legal Entities and Administrative Hurdles
Of course, no investment comes without its fine print. In the case of LLI, the main caveat is the requirement to invest via a legal entity—typically a Société Civile Immobilière (SCI). For many private investors, particularly first-timers, the idea of setting up and managing a real estate company can be intimidating.
“You have to go through the administrative process of creating a company, which isn’t something most retail investors are familiar with,” acknowledges Charles-Emmanuel Kühne, CEO of Icade Promotion. “That said, we’re seeing increasing interest from individuals, especially those who are used to dealing with notaries or who already have experience with rental property.”
To ease the learning curve, Icade has partnered with the accounting firm Amarris Immo to offer turnkey support. For a fee of around €1,700, investors can receive full assistance in setting up their SCI and managing its affairs during the first year. Rival developer GreenCity Immobilier is rolling out a similar package.
The goal? To make LLI investment as seamless and accessible as possible for average individuals—especially in a climate where traditional rental investments are losing their fiscal edge.
Why Now Might Be the Right Time
So why is this initiative becoming relevant in 2025, a full decade after the LLI model first launched? The answer lies in timing and market conditions.
With Pinel gone and interest rates stabilizing after a turbulent inflationary period, many investors are once again looking to real estate—but with a more critical eye. The days of speculative buying, driven solely by tax breaks, may be behind us. Instead, investors are seeking stable returns, affordable entry points, and long-term security—all qualities the LLI model is uniquely positioned to deliver.
According to Kühne, net rental yields for LLI properties hover between 3% and 3.5%, similar to what investors could expect from Pinel in its final years. While these returns may not be spectacular, they are relatively predictable—especially when paired with fiscal incentives and rent stability due to tenant income restrictions.
“The market potential is absolutely there,” Kühne says. “Banks, wealth advisors, and even notaries are starting to see the value in this model, particularly in high-demand areas where housing supply remains tight.”
LLI: A Blueprint for the Future?
As policymakers search for long-term solutions to France’s housing crisis, the LLI model offers more than just a stopgap. It provides a sustainable framework for private investment in affordable housing—one that aligns market incentives with social objectives.
Critically, it also reflects a broader shift in how real estate investment is evolving. Gone are the days of one-size-fits-all solutions like Pinel. The future may belong to tailored schemes like LLI that reward investors willing to engage more deeply with the structure of their investments.
Still, widespread adoption will depend on awareness. “It’s a well-kept secret,” admits Kühne. “But once people understand how it works—and what they stand to gain—it could become a cornerstone of the next generation of rental investment in France.”
Final Thoughts
For now, the Intermediate Rental Housing model remains in its early days among private investors. But with fiscal perks, discounted prices, and increasing institutional support, it offers a tantalizing proposition.
Yes, it may demand a bit more paperwork. But in exchange, investors receive long-term stability, social impact, and a real chance to ride the next wave of property investment—in a smarter, more sustainable way.
In the post-Pinel landscape, LLI might just be the blueprint real estate needed.