Airbnb has been phenomenally successful since its inception in 2007. The company started in San Francisco, when two hosts opened their homes to three guests. Less than 25 years later, the platform now has over 4 million hosts that have welcomed over 1.5 billion guests in almost every country in the world. The platform isn’t just convenient for travelers, but has been a way for many small investors to access the real estate asset class. However, with its success has come controversy. Local residents, and governments, in many cities around the world believe that Airbnb property investment is raising rents, and property values, to the extent that locals can no longer afford to live in their own cities. It is a politically charged issue in many places; local governments have responded by placing a variety of restrictions on Airbnb rentals. This article walks you through new European Airbnb regulations in cities that are desirable for real estate investment, and discusses strategies for optimizing your property investment return in the presence of these new European Airbnb regulations.
Which cities are best for Airbnb investment?
In the past, cities that received a lot of tourists were ideal for Airbnb investment; a large stream of tourists guarantees a large supply of potential customers. Other factors that make a city ideal for Airbnb investment are:
- Low initial investment thresholds (ie: relatively low property prices)
- High rents, in general
- Low cost of living (which translates to lower utility bills and other costs of doing business)
- Regulatory environment
We discuss the first three of these factors in our article: What is the European city with the highest rental yield. Keep reading to learn about the fourth factor as we discuss new European Airbnb regulations, by city.
London
London imposed regulations on short term property rentals in 2o17. These regulations are still in effect: homeowners can only let their home short term for 90 days per year. This applies for renting an entire home; there is no limit on the number of days, or amount of rooms, homeowners are permitted to let each year if they are not renting the entire house. The City of London works closely with Airbnb so there is no way around this regulation; once the property is occupied 90 days, the Airbnb platform will automatically close the listing until January 1st of the next calendar year. Moreover, at least one of the homeowners providing the accommodation must pay Council Tax on the property.
If you exceed the 90 day limit, you must obtain permission from your local council. This can be a lengthy, tedious process depending upon the council. Furthermore, there is no guarantee they will grant your request; many do not.
Unlike in other cities, like Paris, the 2017 Airbnb regulations in London were actually created to be more friendly to short term rentals. Prior to this, homeowners had to obtain planning permission from the local council to rent their properties short term. This was due to the Greater London Council Act of 1973, which prohibited any short term lets, defined as any single stay of less than 90 days, in the Greater London area.
Paris
As we mentioned above, Paris used to be the largest Airbnb market in Europe/the UK. Parisian homeowners wishing to let their properties short term were some of the hardest hit by new European Airbnb regulations.
At face value, it appears that the Parisian Airbnb restrictions are less restrictive than those imposed by the City of London. Homeowners can rent their property short term for a period of 120 days, as opposed to the 90 day limit in London. However, it isn’t as straightforward as it seems. The residence must be their primary residence, which means properties cannot be purchased for investment purposes. The property must be registered with the local Mairie (Town Hall) and a registration number obtained.
Unlike in London, where the Airbnb platform closes bookings for Airbnbs that reach the yearly limit, the Parisian authorities issue fines to homeowners of 50,000€ for exceeding the limit. The government has employed agents to go through Airbnb listings and look for offenders. And they don’t just charge homeowners; in 2021 the Airbnb platform was sentenced to pay 8 million euros for 1,000 listings in Montmarte without registration numbers. Furthermore, over 200 owners were sentenced for non-compliance with the town planning or tourism codes.
The situation becomes even trickier if you want to buy a property in Paris dedicated for short term rental on Airbnb. To do this, you are required to convert the property into an official registered tourist accommodation. To do so, you must apply to the local Mairie for approval. However, this will not be granted unless you can prove that you have tripled the amount of residential space elsewhere in the area.
Do you find all these new European Airbnb regulations intimidating? Perhaps they have discouraged you from investing in real estate altogether? If so, you need an expert to help you learn how to optimize the occupancy rates and rental returns on investment properties. We invite you to arrange a FREE CONSULTATION TODAY to learn how to invest intelligently in European real estate.
Rome
Airbnb regulations in Rome are strict and they are getting stricter. Currently, short term Airbnb rentals on entire homes are restricted to 60 days per year. Moreover, to legally operate an Airbnb (or any other short term rental property in Rome), hosts must comply with a registration process and adhere to the city’s rental regulations. First, you must apply for a SCIA (Segnalazione Certificata di Inizio Attività), a Certified Report of Start of Activity. This document is mandatory for individuals intending to start a short term rental activity in Rome. It’s obtained from the local Comune (Town Hall). Then, the property must be registered with the police.
In May 2023, Italy’s Tourism Ministry released the first draft of a new law which it says will curb short-term tourist rentals, including Airbnb lets, around the country. This decree includes two main measures: a two night minimum stay requirement and a new type of identification code for property listings.
The minimum stay of two nights would apply to short term rentals in all of Italy’s 14 metropolitan cities (Bari, Bologna, Cagliari, Catania, Florence, Genoa, Messina, Milan, Naples, Palermo, Reggio Calabria, Rome, Turin and Venice). This minimum stay requirement aims to promote longer visits and make so-called “hit and run” tourism, or very short stays, less common; Italian authorities believe this contributes to overcrowding in the most popular areas.
The new identification code will be a national code, as opposed to the current identification code required by the City of Rome. These restrictive new laws will apply to cities nationwide. Only cities with fewer than 5,000 residents will be exempt from these new European Airbnb regulations. Smaller cities that get a large amount of tourists, specifically Milan and Venice, are considering even more stringent regulations. Florence has already announced that it will limit new tourist accommodation in the city’s historic center.
Athens
Athens currently places very little regulation on Airbnbs. Much of this is due to the fact that for decades, real estate was the primary investment vehicle for most Greek families. The Airbnb phenomenon was a blessing for locals that had vacant family homes; renting them provided an additional source of income. However, this is set to change. Hotel owners and local authorities have demanded that the government intervene to impose restrictions on the growth of the Airbnb sector. The Minister of Tourism, Vassilis Kikilias, recently confirmed that the government is responding by drafting a new framework for Airbnb regulation. “This framework will separate those who rent out bulk properties versus the majority who rent out one or two properties.” Although it has not been finalized, the government recently announced that it would limit property owners to no more than three Airbnb properties. Moreover, these Airbnbs will be taxed the same as hotels. It remains to be seen whether yearly limits will be set on short term property rentals, as in London and Paris. It has been proposed to limit short term rentals to 90 days in Athens, Santorini and Mykonos.
Barcelona
Barcelona was one of the first cities to impose new European Airbnb regulations. It started by requiring tourist licenses for all Airbnbs. Then, the Catalan authorities ceased issuing new tourist licenses. Therefore, if you want to rent your property short term you must purchase a property that already has a license; these are priced at a high premium to properties that don’t have licenses. There is no room for skirting these regulations- the authorities have an entire team dedicated to scouring Airbnb listings, removing any that do not comply with regulations and issuing fines for violating the regulations.
In 2o21 the city went one step further. It placed restrictions on not just renting out entire properties short term, but even individual rooms. Hosts are not permitted to rent out a room for less than 31 days. A dedicated team checks for illegal listings and has them removed.
Madrid
There is a lot of misinformation on the internet about the Airbnb laws in Madrid. Little to nothing has been written about the stance the City of Madrid is taking on Airbnbs. Madrid Estate actively manages a portfolio of properties for various clients, so we have the most up to date information available.
Short term rentals
The truth is, as of autumn 2023, the City of Madrid has been quietly following the lead of other big cities and sharply curtailing short term tourist rentals. As in Barcelona, the city is no longer issuing tourist licenses. The exception to this is if you have a ground or first floor property with no neighbors underneath. Furthermore, there are additional requirements, stipulated by the city, that you must meet. Finally, the property must be certified by an architect.
If your neighbors report that your property doesn’t meet the regulations, and you are found guilty, the city is issuing fines of 15k€ to Airbnb owners.
Rentals more than 28 days
Under the new regulations, properties can still be rented, but the terms have to be for 28 days or more. The spirit of the law is that the city doesn’t want apartments rented to tourists, but to people staying in the city longer than 28 days to study or work.
Strategy for optimizing your return in the presence of new European Airbnb regulations
What many people don’t realize is that properties can be rented on the Airbnb platform both short term and medium term rentals. NOTE: This blog, and other real estate professionals, consider a medium term rental to be 28 days-11 months. However, it’s important to realize that Airbnb’s website uses a different terminology. They call any rental term over 28 days a long term rental. With the rise of digital nomad visas and more students studying abroad, this is becoming an increasingly attractive rental option for property owners.
Madrid Estate has many clients that still list their properties on Airbnb. In light of the new European Airbnb regulations, we have found the sweet spot to be renting for 28 days-11 months. There are many advantages to renting your property in the medium term:
- Higher occupancy rates
- Less wear and tear on the property
- Much lower property maintenance fees
- Lower Airbnb fees
- Less seasonality in rental returns
We say that 28 days-11 months is the “sweet spot” because it’s the best of both worlds for property rental. You can still get a solid return. Madrid Estate clients average a 5% net return (net meaning after expenses, based on the total amount you invest). Additionally, you still have flexibility if you want to use your property, and you don’t have to deal with the legal responsibilities that come with renting a property for a year or more.
Ideal medium term rental clients
Madrid Estate has found that students are excellent medium term rental clients. This is particularly true for our properties in the neighborhoods of Chueca and Malasaña, due to their proximity to restaurants, cafes and the city’s nightlife. Plus, these neighborhoods are well connected to the prestigious IE University and Business School, so students have the best of both worlds. These students are hard working (no wild parties) with affluent parents to pay their rent.
The hottest up and coming neighborhood for student rentals is Tetuan; it has the added benefit of having the highest rental yields in Madrid.
