Short-term rental bans fail to reduce housing prices in European cities

European cities are beginning to reconsider their approach to managing short-term rental bans after new evidence suggests these restrictions have failed to control rising housing prices. Lisbon recently became the first major European city to abolish its ban on new short-term rental accommodation, a policy originally implemented in 2019, after officials determined the measure had no measurable impact on containing property values in the Portuguese capital.

The decision comes as Portugal faces one of the most severe housing crises in the European Union. According to data from the European Central Bank, housing sale prices in Portugal surged by 23.35% in 2025, marking the country as a leader in price increases across the EU. City officials concluded that the ban on new accommodations did not address the underlying supply and demand imbalances driving the market.

Greece Maintains Short-Term Rental Ban Despite Similar Results

Meanwhile, Greece has taken a different path despite facing comparable housing challenges. The country implemented a ban on new short-term rental accommodation at the beginning of 2025, which was subsequently extended this year. The restrictions apply to the first three municipal districts of the Municipality of Athens, covering popular neighborhoods including the commercial triangle, Pangrati, and Neos Kosmos.

However, the results in Athens mirror those observed in Lisbon before the policy reversal. The average asking price in the Municipality of Athens increased by 11.6% in 2025, reaching €2,400 per square meter. This figure surpassed price growth in any other area of Attica, raising questions about the effectiveness of the ban.

Price Increases Concentrated in Banned Areas

Additionally, the neighborhoods most directly affected by the short-term rental ban experienced the most dramatic price increases. Areas around Omonia Square and Syntagma, where the restrictions on new housing were implemented, saw prices surge by 22.8% in 2025. This counterintuitive result suggests that limiting short-term rentals alone does not resolve housing affordability issues.

According to market sources, the continued price escalation stems from persistent high demand relative to housing supply, particularly in areas with more affordable housing stock compared to northern or southern suburbs. The ban has not addressed the fundamental mismatch between available housing units and population needs in urban centers.

Why Short-Term Rental Restrictions Show Limited Effectiveness

The European experience demonstrates that housing price growth is driven by multiple factors beyond short-term rental accommodation availability. In contrast to expectations that converting short-term rentals to long-term housing would ease pressure on prices, the evidence suggests demand continues to outpace supply regardless of rental type restrictions.

Portugal’s housing supply deficit and Greece’s similar challenges indicate that broader policy interventions may be necessary. The measures need to address construction rates, zoning regulations, and overall housing stock expansion rather than focusing solely on rental accommodation types.

Lisbon’s decision to reverse its ban represents a significant policy shift that other European cities may study closely. The Portuguese capital’s acknowledgment that the restriction was ineffective suggests a willingness to explore alternative solutions to housing affordability challenges facing residents.

Greek authorities have not indicated whether they will follow Lisbon’s example and reconsider the short-term rental ban currently in place. The decision on whether to maintain, modify, or abolish the restrictions in Athens will likely depend on continued monitoring of housing price trends and supply dynamics throughout 2026.