Evidence from Lisbon shows that bans on short-term lettings do not solve the housing cost crisis

According to data from Lisbon City Council, the number of properties registered for short-term lets has fallen by 40 per cent over the last three years (from around 20,000 in 2023 to nearly 12,000). By contrast, according to INE, the national statistics institute, the median rent for new tenancy agreements in the Portuguese capital has risen by 8.2 per cent in the last year alone. This comes just over two weeks after the proposal for the Affordable Housing Act, presented by European Commissioner Dan Jørgensen with the aim of alleviating the housing crisis, citing Lisbon as an example of a city in need of restrictions. However, this is not the case. The data show that the cost of housing cannot be tackled through bans but by increasing the housing supply; that a property no longer on the short-let market does not necessarily mean it will be offered on the ordinary market; and that restrictions impose costs and protect tourism operators from competition. The Commission is also aware of this, given that in the proposal it states that restrictions alone do not solve the problem of high housing costs. But Jørgensen went further: the Affordable Housing Act, which will be debated in the European Parliament and the Council, provides for the establishment of a common framework to restrict short-term lets and property sales in areas subject to ‘housing pressure’, including extreme measures against private ownership in relation to lettings and sales that do not concern a primary residence.

Much of the decline stems from a move by the centre-right mayor, Carlos Moedas: in February, the Lisbon City Council revoked 6,765 licences from landlords who did not have the compulsory insurance. According to the logic behind the bans, their properties should have been transferred to residents or the rents should have been reduced, but this did not happen. Lisbon introduced its first restrictions on short-term lettings in 2018, banning new registrations in certain historic neighbourhoods where such lettings accounted for more than 25 per cent of housing stock. A paper by Duarte Gonçalves, Susana Peralta and João Pereira dos Santos for the German institute IZA found that property prices in these areas fell by 8 per cent, because buyers had lost part of their right to enjoy private property: if a property was not already registered, it could not be rented out to tourists. “House prices have continued to rise, regardless of the restrictions,” Pereira dos Santos told the Portuguese newspaper Jornal Económico in mid-September. “Short-term lets are the scapegoat for the housing crisis,” wrote deputy editor Nuno Vinha in the Diário de Notícias a few days ago. Vinha noted that whilst short-term lets have contributed to increasing pressure on prices, they are certainly not the decisive factor, as other factors carry far greater weight: the shortage of new builds, the slow processing of planning permission and strict rental regulations.

Lisbon thus joins a long list of cities where the results of the restrictions have been disappointing. Starting with Berlin, Hamburg and Munich, which have set a cap on the maximum number of days a property can be let, but where a study by economists at the University of Münster (Grauss et al, 2024) found that few homes have switched to long-term lets, without a statistically significant drop in residential rents. Or take Paris, where those who let their homes to tourists may do so for a maximum of 90 days, but alternative contractual arrangements not covered by the bans are on the rise, as reported by the Paris Urban Planning Agency (Apur) regarding the ‘bail mobilité’. In New York, in the United States, the story is much the same: from 2023 to 2025, according to the Wall Street Journal, short-term lettings fell from 38,000 to 3,000, yet the median rent in Manhattan rose above the record high at the time ($4,700 per month). The moral of the story? No ban works if supply does not meet demand.