Short-term lettings, from New York to Barcelona: here’s the impact of city-wide bans

Could introducing restrictions on short-term lets – or even banning them altogether – resolve the housing crisis afflicting many cities with high rents and a shortage of available flats? This is the question raised by the European Commission’s presentation of the draft Affordable Housing Act , which, if approved, will authorise local authorities experiencing ‘housing stress’ to impose restrictive measures on tourist rentals.

An answer to this question can be found in the experiences of cities that have already adopted strict regulations, as reviewed by the Bruno Leoni Institute: ‘The lesson from ten years of experiments, from Berlin to New York, is quite clear – it states –: bans almost always succeed in reducing the number of listings, sometimes drastically’ but ‘only rarely do they bring’ properties intended for short-term lets ‘back onto the mainstream market’, whilst ‘the effect on rents, where there is one, is minimal’.”

It should be emphasised that these recommendations are not necessarily at odds with the proposals of the European Commission. The Commission has, in fact, explained that the new regulations on short-term lettings will form part of a package of measures. Some of these measures will need to address the other key aspect of the problem: the supply of properties at affordable prices. It is this, rather than the issue of short-term rentals, that will be at the heart of the European Housing Plan.

This also helps to explain the Bruno Leoni Institute’s suggestion: ‘Tackle the problem at its root by increasing the supply of housing, for example by converting office buildings rendered obsolete by remote working and corporate reorganisation, or by relaxing restrictions on the construction of new buildings or the extension of existing ones.’

Berlin has taken action on short-term lettings on two occasions to make the rental market more accessible. In 2016, the German capital introduced a ban on using homes for tourist lettings without authorisation from the local council. Two years later, it amended the regulations, allowing the letting of main residences and second homes for up to 90 days a year. Only the first measure increased the supply of standard rentals, but to a lesser extent than expected: the ban does not result in a one-to-one conversion (from short-term to long-term lets). ‘Every additional commercial listing reduces the residential supply by between 0.23 and 0.37 units’. The second measure appears to have had no discernible effect.