Europe's New Rule: The Cure Can't Be Bigger Than the Disease

Thibault Masson (0:01)

Oh, it's all about balance. It's all about balance.

The first thing I want to mention is that this week, Google removed one of the ways travelers could discover vacation rentals directly inside search results across the whole European economic area, which is the EU plus Norway, plus Iceland, plus Liechtenstein. Welcome to RSU by Pricelapse Weekly Podcast. Subscribe now. And that one day later, the European Commission proposed new rules that could influence how cities and countries, regions are allowed to restrict short term rentals in name of housing across 27 countries, home to more than 450 million people. Big news, right? And I will say, it's all about balance. Let me drop my weight on the ground, not on my feet. And tell you more about this. Here I am. So, these could sound like two completely different stories, right? Well, on the surface, yes. But I think they're connected. And the connection is this question of balance. We use that word all the time in our industry, balance regulation, fair competition. But what does it actually mean when somebody has the power to shape a market?

Let's look at this. Short-term rental operators know the regulation side of this very well, right? Because for years, our industry has been on a receding end of limits. On the number of nights you can rent, think licenses, rules that only let you rent the home you actually live in, or restrictions on second homes, or sometimes complete bans. In Europe, there's not one short-term rental policy, right? It's an enormous patchwork. Paris now limits short-term rental of your own home, the one you live in, to 90 nights per year, while Amsterdam, it's generally at 30 nights, or even 15 nights per year in some part of the city. And Barcelona has said that it tends not to renew more than 10,000 licenses for tourist apartments when expiring in 2028 So, there are just three cities and three very different approaches. And when you add regional rules, national laws, registration numbers, court decisions, it's crazy. If you're a party manager operating across several markets, it gets very complicated very fast. Now, here's the thing. Professional operators don't necessarily tell me that all regulation is bad. Actually, I often hear the opposite. Clear rules, they can live with. That's what they want. The problem is when regulation feels arbitrary. It goes too far, right? When the rules suddenly change, or when the restriction seems much bigger than the problem it's supposed to solve.

That's why I find what the European Commission proposed this week interesting.

It's part of what's called the Affordable Housing Act. And you've probably seen headlines describing this at some kind of entire BNB law. I do not think that's really what the proposal says. The Commission starts from a housing problem. Housing in Europe is becoming too expensive for a lot of people. And importantly, the Commission itself says that the root of the problem is that there simply are not enough homes. Short-term rentals are not presented as the cause of Europe's housing shortage. However, the Commission does say that in some markets, turning homes into short-term rentals could make that pressure worse. So yes, a city or government may have legitimate reasons to restrict short-term rentals to protect housing.

But then comes the part I find more interesting. And don't read about this often in the other articles, funny enough. If you're going to restrict short-term rentals because of housing, you should be able to demonstrate the problem. You should be able to show that short-term rentals are actually a significant part of it. And the proposal talks from the Commission's proposal, right? It talks about at least three years of evidence.

Local governments should look at whether something less drastic could solve it. And the restriction should not go further than the problem requires. In legal language, that's called proportionality. But in plain words, the cure shouldn't be bigger than the disease. Balance, right? Balance. That's important because it's not Brussels saying, here's one Airbnb rule for the whole of Europe. Paris will still regulate Paris, Barcelona will still regulate Barcelona, and national governments, regions and cities will still have their own rules. What Brussels is trying to create is a common way of judging those restrictions, whoever imposes them. We've seen the idea before, right? Under existing European law, not under this new Affordable Housing Act, which is still a proposal, but the principle isn't completely new, and Paris and Amsterdam give us two sides of it. Paris first. In 2020, Europe's higher court looked at the permit system France uses for short-term rentals, and it accepted that protecting the homes people live in year-round is a legitimate reason for restrictive rules. So European law did not tell Paris it could not regulate, quite the opposite. On the other hand, Amsterdam, where Amsterdam banned vacation rentals completely in three central neighbourhoods, and in 2023, the Dutch Council of State, the country's highest administrative court, struck that ban down under European law. To be fair, that case was not about this new act, right? And Amsterdam was also arguing about how livable the city center was, so it's not exactly the same question. But the court didn't say Amsterdam had no problem. It asked whether a total ban was really necessary. Had the city looked at softer options, like a cap rather than zero, or whether the existing 39th limit had even been properly assessed? It found Amsterdam hadn't done that work and the ban fell. So I think Paris and Amsterdam together are useful, right? These examples are interesting to look at. The European law can accept very strong short-term rental regulations, but having a legitimate reason does not automatically justify every restriction you choose. And now, with housing specifically, the Commission is trying to make that logic clearer across 27 markets and countries. So balance, right? It's not just about more regulations. It's like, should the restrictions should fly? Because again, what the EU doesn't want is that a lot of these local laws are passed, and then they go to the EU courts, and they struck down because they just go too far. So the EU is like, let me give you a framework and have laws, regulations within that framework. So later, don't come to me and have to strike down these rules because we went too far. Now, let's look at Google, right?