Why short-term rental bans are not cooling home prices

Lisbon and Athens expose the limits of bans

European cities have increasingly turned to short-term rental restrictions in an attempt to ease housing pressure and return homes to local residents. Yet the experience of Lisbon and Athens suggests that banning new short-term rental units is not enough to cool property prices on its own. Even where these rules have been in place for years, housing costs have continued to rise and affordability has remained under strain.

Lisbon has become one of the clearest examples of this policy reversal. At the end of 2025, the city scrapped its ban on new short-term rental licences in the historic centre after concluding that the measure had failed to produce a meaningful effect on housing affordability. In the European context, that was a notable move: instead of tightening restrictions, Lisbon effectively acknowledged that the earlier approach had not delivered the intended market correction.

Lisbon lifted restrictions while prices kept climbing

The Portuguese case matters because it unfolded against a backdrop of exceptionally strong housing inflation. According to Eurostat, Portugal recorded the highest annual house-price growth in the EU in the first quarter of 2025, at 16.3%. Later in the year, growth remained elevated, with annual house-price inflation reaching 17.7% in the third quarter of 2025. The European Commission also identified Portugal as one of the most overvalued housing markets in the bloc.

That raises a broader question about the effectiveness of outright bans. If several years of restrictions on new short-term rental licences did not halt price growth in Lisbon or across Portugal, then the root of the housing crisis clearly extends beyond tourist apartments alone. Structural undersupply, delayed construction, strong investor demand and broader market pressures appear to matter at least as much as the short-term rental segment itself.

Athens extended its ban but prices stayed under pressure

Athens has gone in the opposite direction. The Greek government introduced a ban on new short-term rental registrations in central Athens from January 1, 2025, and later extended it through 2026. The measure applies to the first, second and third municipal districts, effectively covering the most sought-after central neighbourhoods for tourist-oriented rentals.

Yet even with the moratorium in place, the housing market has not meaningfully cooled. Demand pressure remains strong, particularly in central districts where buyers still seek relatively more affordable stock than in the capital’s expensive northern and southern suburbs. That helps explain why prices in central Athens have continued to rise despite the freeze on new short-term rental licences.

Why bans fail without new housing supply

The core lesson from Lisbon and Athens is that housing markets respond primarily to the deeper imbalance between supply and demand. When new construction is insufficient, when investor activity remains strong, when tourism continues to expand and when cities still attract mobile professionals and foreign capital, restricting one segment of the rental market does not automatically reset prices.

In practice, these policies can also redirect demand rather than remove it. Some investors move to adjacent neighbourhoods, some keep properties vacant, and others shift assets into alternative uses. As a result, the long-term rental market may receive far fewer units than policymakers originally expected, while price pressures persist. This is why Europe is increasingly moving toward more nuanced frameworks that combine housing supply measures, incentives for long-term renting, tax reforms and platform regulation, rather than relying solely on blanket prohibitions. The European Commission’s late-2025 housing approach reflected that shift by favouring regulatory tools over universal outright bans.

What these cases mean for Europe’s housing debate

The broader conclusion is not that short-term rentals have no impact. In highly touristed districts, they can clearly intensify competition for housing and accelerate neighbourhood change. But the Lisbon and Athens cases suggest they are not the sole driver of the affordability crisis and may not even be the dominant one in many markets. When governments target Airbnb-style rentals without simultaneously addressing supply shortages, construction bottlenecks, financing constraints and speculative demand, prices can continue rising anyway.

For investors, that means short-term rental crackdowns do not automatically imply a housing correction. For policymakers, it means politically visible restrictions may still fall short economically if they are not paired with a broader housing strategy. As International Investment experts note, the examples of Lisbon and Athens show that short-term rental restrictions can be one part of housing policy, but they cannot substitute for structural reform. As long as housing supply in Europe’s major cities expands more slowly than demand, home prices are likely to remain under pressure even where new short-term rental permits are already banned.