European cities tackle housing crisis caused by overtourism and vacation rentals

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In popular tourist destinations like Barcelona and Paris, locals are increasingly struggling to find affordable housing, a problem that officials are starting to address.

Barcelona, one of the world's top travel destinations with 15.6 million visitors in 2023, has been particularly affected. In response, the city has announced that it will no longer renew or grant vacation rental licenses. With over 10,000 short-term rental apartments currently available, the last of these licenses will expire in November 2028, after which the city will have no legal vacation rentals.

Barcelona’s Mayor, Jaume Collboni, emphasized that the rental crisis is a significant issue, with rents having risen by 68% in the past decade, while property prices have increased by 38%.

According to Konstantin Kholodilin, a researcher at the German Institute for Economic Research, there is a clear connection between the rise in vacation rentals and higher rent. While the average rent increase tied to short-term rentals is estimated at 2-3%, it varies by location. Real estate prices are also impacted as investors look to purchase properties for tourist rentals. The rise of platforms like Airbnb has driven this trend, with more than 700 million overnight stays arranged in the European Union in 2023, a 66% increase since 2018.

Cities across the globe, including New York, Paris, Amsterdam, Berlin, and Lisbon, have implemented regulations to limit short-term rentals. In New York, for instance, rentals shorter than 30 days are only allowed if the apartment is officially registered and the owner resides there, with a maximum of two guests.

The growing trend of foreign buyers acquiring properties in popular vacation spots further exacerbates the housing crisis. On Spain’s Balearic Islands, one-third of properties are sold to non-residents, pitting local buyers against those with higher incomes from northern Europe. Similar challenges have arisen in the Canary Islands, sparking protests. Some European countries, including Denmark and Finland, have already restricted real estate sales to non-residents in an effort to reduce housing pressure.

Despite the introduction of stricter laws, experts like Kholodilin remain cautious about whether such regulations alone can solve the housing crisis. While some cities have seen a drop in both property prices and vacation rental listings, the long-term effectiveness of these measures remains uncertain.

In Barcelona, the city's association of tourist apartments, Apartur, has criticized the decision to abolish short-term rentals. Enrique Alcantara, the association's chairperson, argues that short-term rentals account for just 0.77% of the city’s total housing and that banning them could drive an increase in illegal rentals.

As cities continue to wrestle with the balance between tourism and affordable housing, it remains to be seen whether these efforts will successfully alleviate the growing strain on local housing markets.