Lisbon is taking a dramatic U-turn on its housing policy, officially overturning restrictions on short-term rentals that were intended to, but ultimately failed to, ease the city's spiralling housing costs.
A Policy That Backfired
The Portuguese capital first began imposing limits on short-term rentals back in 2019, part of a broader package that included ending the Golden Visa scheme for real estate and capping new licences in popular areas like Lisbon and Porto. The goal was clear: to increase long-term housing supply and improve affordability for residents.
However, the data tells a story of policy failure. Since Portugal rolled back some national restrictions in October 2024, giving municipalities more control, the annual growth rate of house sale prices in the Lisbon Metropolitan Area has nearly doubled. Meanwhile, the increase in rental prices has accelerated sharply, from 5.7 per cent to 9.2 per cent annually.
Hotel prices have also been caught in the upward spiral, skyrocketing by a staggering 30 per cent between 2022 and 2024 alone.
Global Lessons from Edinburgh to New York
Lisbon's experience is not an isolated case. It mirrors outcomes in other major cities that attempted to tackle housing affordability by clamping down on short-term lets.
In Edinburgh, strict rules led to a 22 per cent drop in short-term rentals, but were relaxed earlier this year after rents and hotel prices in the city hit record highs, rising twice as fast as the national average.
Barcelona's restrictions, including a ban on new licences for over a decade, saw short-term rental numbers fall. Yet, rents and house prices soared by 70 and 60 per cent respectively to record levels.
Amsterdam's 30-night annual limit saw Airbnb listings drop by 54 per cent from 2019 to 2024, but rents increased by more than a third in that time, far outpacing the 13 per cent rise seen across the Netherlands.
Perhaps most strikingly, New York City's de facto ban since 2023 has not increased housing availability or affordability as promised. Vacancy rates remain unchanged and rents continue to climb, despite Airbnb listings plummeting by approximately 92 per cent. Hotel rates there are now at a record high.
New Rules and Ongoing Tensions
Under Lisbon's new approach, restrictions on hosting in 18 districts will be eased, allowing short-term rentals to make up to 10 per cent of the local housing supply across the city. According to Airbnb, the platform argues this will diversify accommodation options and provide more affordable alternatives to the city's concentrated and expensive hotel sector.
Sara Rodríguez, Head of Public Policy for Spain and Portugal at Airbnb, stated: 'Lisbon's strict short-term rental rules have failed to make housing more affordable. Instead, they made the city less affordable for everyone... We thank Lisbon City Hall for overturning its restrictions.'
Airbnb also highlights that seven in ten of its Lisbon hosts share only one home and say hosting is not their primary job.
This policy shift occurs against a backdrop of significant local unrest. Southern Europe, including Portugal, has seen widespread backlash against mass tourism. Just this June, Lisbon joined coordinated protests under the 'Southern Europe Against Touristification' alliance.
The debate is further complicated by housing vacancy statistics. The 2021 Portuguese Census revealed over 720,000 vacant housing units nationwide, with an estimated 15 per cent of houses standing empty in Lisbon itself—one of the country's most pressured markets.
The reversal in Lisbon suggests a growing recognition that simply restricting short-term rentals does not address the core issue of housing supply, a lesson now being learned from cities across the globe.
