As the cost of living continues to rise, many people are turning to alternative income sources, such as renting out spare rooms, to make ends meet.
In the Paris region, the number of primary residences listed on Airbnb surged by over 80% in May 2024 compared to the previous year. This increase reflects local families’ efforts to capitalize on a rebound in travel demand ahead of the Olympic Games.
“When things are so expensive, renting out a room can be a lifeline.” — Maarten Bruinsma, Amsterdam Gastvrij Chairman
Maarten Bruinsma, chairman of Amsterdam Gastvrij, an organization representing holiday rental owners, highlights the economic pressures forcing more individuals to embrace this option. “I know a former IT professional who wanted to become a teacher but had to occasionally rent out a room to help pay the mortgage,” he explains.
A Booming Market, But Not Without Controversy
The rapid growth in short-term rentals has raised concerns in popular tourist destinations, where buy-to-let properties are often blamed for driving up housing prices. In Athens, for instance, the city council is engaged in a legal dispute with companies that are purchasing entire apartment blocks to rent out on platforms like Airbnb and Booking.com.
However, critics argue that this narrative oversimplifies a broader issue. While “illegal hotels” and property owners with multiple listings do reduce the available housing stock, they represent a small fraction of Airbnb hosts. Overregulation targeting these cases risks ignoring broader contributors to housing inflation, such as escalating construction costs and rising mortgage rates. Moreover, heavy-handed restrictions could deprive many hosts of a critical income stream during difficult economic times.
Regulatory Backlash in Key Cities
In Amsterdam, stricter short-term rental laws limit hosting to 30 nights per year, while Barcelona plans to phase out short-term rental licenses entirely by 2028. New York has enacted similarly harsh measures, which have disproportionately affected its poorest boroughs by reducing visitor spending by an estimated $1.6 billion annually and cutting local worker earnings tied to Airbnb stays by $573 million.
“Although ‘illegal hotels’ and people who own multiple rental properties do reduce the housing stock, they are not the average host on Airbnb.”
While these policies aim to address housing concerns, they often produce unintended consequences. For instance, hotel rates in Manhattan have soared by over 50% year-on-year, reaching an average of $524 per night — a price point many travelers simply cannot afford. In contrast, short-term rentals offer more accessible alternatives, helping to balance accommodation costs in high-demand tourist hotspots.
Risks for Rural Areas
In Europe, national-level regulation of short-term rentals could exacerbate the urban-rural divide. “In rural areas, short-term rentals are often the only way to generate tourist income outside peak seasons,” says Klaus Ehrlich, general secretary of RuralTour, the European Federation of Rural Tourism. He notes that unlike urban centers, many rural regions actually experience a housing surplus due to lower residential demand.
Limited Effectiveness of Blanket Policies
Cities like Barcelona, which have implemented broad restrictions on short-term rentals to ease housing pressures, are discovering that the impact is minimal. “You have to ask how many of those short-term rentals will return to the housing market, and the answer is very few,” says Matthew Dass, associate director at Oxford Economics. He points out that a significant portion of Airbnb listings consist of holiday homes or spare rooms in long-term rentals, meaning such properties are unlikely to become permanent housing.
In Amsterdam, over-regulation has caused short-term rental activity to plummet by 52%, yet the city has simultaneously seen an increase in overall hotel guest nights by 12%. According to Dass, these rules have led to an estimated €269 million in lost host earnings for Amsterdam alone.
Moreover, individuals hosting short-term rentals face significant penalties for even minor infractions, such as failing to report the number of nights rented in advance, which can result in fines as high as €8,700. Such stringent policies disproportionately impact the 95% of Airbnb hosts in Amsterdam who are private individuals.
“Restrictive regulations can have unintended consequences.”
Spain is also proposing a 21% VAT on short-term rentals, further discouraging the practice by broadening the gap between hosts and traditional businesses like hotels, which are allowed to deduct expenses from taxes. Many argue that treating private individuals as businesses without offering similar incentives will only decrease participation.
Striking a Balance: A Smarter Approach
Developing balanced policy solutions starts with fostering transparency in the short-term rental market. Earlier in 2024, the European Parliament approved new rules requiring large platforms to share monthly rental data with local authorities. This transparency aims to dispel myths surrounding short-term rentals and prevent over-regulation that could inadvertently harm local economies or tourism.
Smart regulations can preserve the economic benefits of platforms like Airbnb while addressing their downsides. By leveraging data, governments can craft evidence-based policies that target specific problems
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