European Commission gives cities new powers to restrict short-term rentals

Brussels moves into local housing policy

The European Commission has proposed an Affordable Housing Act intended to give national and local authorities clearer legal authority to restrict short-term holiday rentals in areas under severe housing pressure. Housing Commissioner Dan Jørgensen presented the initiative on September 9 and described the affordability problem as a European emergency in an interview published by Euronews the following day.

The proposal addresses a recurring obstacle for cities that have tried to limit professional holiday letting: operators have challenged local rules as incompatible with EU law. The Commission says its framework would provide greater clarity and predictability when municipalities cap, license or otherwise regulate short-term accommodation in demonstrably stressed markets.

A concentrated problem

Short-term rentals account for about 1.2% of the EU’s housing stock overall, according to the Commission figures reported by Euronews, but can represent as much as 20% in heavily visited districts. That concentration helps explain why residents in cities such as Lisbon, Barcelona and Brussels can experience a much sharper effect than the EU-wide share suggests.

The Commission says EU home prices have risen by roughly 60% over the past decade, while rents increased by more than 20%. An official Commission information page accompanying the proposal identifies housing as the leading concern for 40% of EU residents and 51% of people in cities. It also cites particularly steep rent increases in Berlin, Madrid and Lisbon.

What the act can and cannot do

Housing construction, planning and social policy remain primarily national, regional and municipal responsibilities. Brussels cannot by itself set rent levels or decide how many holiday lets a neighbourhood may contain. The proposed act instead creates a common legal framework within which local governments can act and is accompanied by recommendations for longer-term national affordability and supply plans.

That distinction means the proposal’s impact will depend heavily on implementation. Cities will need evidence that an area is under housing stress and must design restrictions that comply with the final EU rules. Member states will also need to decide whether restrictions are paired with construction, renovation, social-housing investment and measures addressing vacant property.

The legislative process now moves to the European Parliament and member-state governments. Key issues will include the definition of a stressed housing area, safeguards for occasional home-sharing and the degree of discretion left to municipalities. The proposal is already a consequential shift: the Commission is treating local affordability pressures as an EU-wide economic and social problem requiring shared legal tools.