European Commission proposes rules to let cities restrict short-term holiday rentals

European Commission framework

On 9 September 2026, the European Commission introduced the Affordable Housing Act, presenting a standardized framework for municipalities to regulate short-term holiday rentals. The proposal establishes criteria to define areas under housing stress, using the ratio of real estate prices to median local income. Under the rules, local authorities can enforce restrictions or bans on commercial holiday lets that are not primary residences, provided they demonstrate that tourist rentals worsened market pressures over the previous three years. Any adopted municipal caps are limited to a duration of five years and require regular reviews. European Commission Executive Vice-President Teresa Ribera explained the objective during the presentation in Brussels.

We are giving mayors tools to take justified, necessary and proportionate measures.

Urban rent pressures and cost burdens

Commission data indicates that property purchase prices across the European Union increased by roughly 60% over the past decade, while residential rents grew by approximately 20%. Rent growth has concentrated heavily in high-demand metropolitan areas, rising by 103% in Lisbon, 75% in Madrid, and 59% in Berlin over the same ten-year period. In central Madrid, approximately 40 short-term rental listings operate for every 100 properties available on the long-term rental market. Eurostat figures for 2025 show that 11.2% of the population in Germany spent more than 40% of disposable income on housing costs, compared to an EU average of 7.7%. Dan Jørgensen, the EU Commissioner for Energy and Housing, addressed the scale of the shortage across urban centers.

51 percent of European citizens living in cities consider the lack of affordable housing a serious problem, we are in a housing crisis, we must act.

Existing municipal measures and legal challenges

Cities including Barcelona, Lisbon, Amsterdam, and Paris previously introduced local restrictions to curb holiday platforms like Airbnb, Booking, and Expedia. In Bavaria, German municipalities have possessed legal authority since 2007 to restrict residential subletting to eight weeks per calendar year. In Madrid, municipal rules prohibit short-term rentals in residential buildings in the city center unless the entire building is dedicated to tourism, while outer-district rentals require direct street access. The Madrid city hall reported that active tourist rental listings dropped by 40% between August 2024 and May 2026 to 13,431 apartments. In Paris, a local court fined a real estate company 585,000 euros for illegally converting a residential property beneath Montmartre into visitor accommodations.

Industry criticism and legislative path

The proposed directive now requires formal approval from the European Parliament and the Council of the European Union before taking effect. Industry representatives and opposition lawmakers voiced reservations about whether targeting short-term platforms resolves broader supply deficits. Markus Ferber, a German Member of the European Parliament for the CSU, argued that the initiative targets the wrong regulatory levers.

The central question is why too little is being built and which European legal acts stand in the way of construction.

Kai Warnecke, president of the German property owners association Haus & Grund, argued that intervention should occur only where long-term market strain is proven locally without requiring European-level guidelines. According to the Federal Statistical Office, travelers in Germany booked 68.3 million overnight stays across Booking, Airbnb, and Expedia in the past year.