Europe’s housing crisis is fundamentally a supply problem, yet the Affordable Housing Act still puts too much emphasis on regulating short-term rentals. If Europe wants to make housing genuinely more affordable, it needs to make it easier to build, renovate and bring vacant homes back to market.
Written By: Nicos Rompapas, President at Center for Liberal Studies – Markos Dragoumis (KEFIM) in Greece
When the European Commission unveiled its Affordable Housing Act on 9 September, Europe was promised a major step forward in tackling one of its most pressing social and economic challenges. Yet after reading the proposal, one cannot escape the feeling that the long-awaited “AHA moment” remains missing.
Not because the Act is disastrous. In some respects, it is more balanced than critics feared. But it still focuses much of its political energy on regulating short-term rentals while leaving largely untouched the fundamental problem driving housing unaffordability across Europe: not enough homes are being built, renovated and brought to market.
As the 2025 study by the European Liberal Forum shows, Europe’s housing crisis is primarily a supply crisis. Prices and rents rise because construction and renovation cannot keep up with demand. Restrictive zoning, slow permitting procedures, legal uncertainty and disincentives to investment have made housing scarcer and more expensive across much of the continent.
The Commission’s own figures underline the urgency. House prices in the European Union have increased by more than 60% since 2013, while rents have risen by around 20%. What was already a warning has become the monthly reality for millions of Europeans.
Short-term rentals have become a political symbol
In order to tackle this crisis, one of the aspects of the Act allows authorities to designate areas experiencing “housing stress” and, under strict conditions, restrict short-term rentals. Local authorities must demonstrate that affordability has been harmed, show that less restrictive measures would not work and ensure any restrictions are targeted, proportionate and time-limited.
The problem with this is however that short-term rentals have become the political symbol of a much broader housing shortage. Politics is naturally attracted to visible culprits. While housing shortages are complicated, Airbnb and similar platforms are easy to understand. Yet, the evidence remains mixed and highly context-dependent. Restrictions on short-term rentals may ease pressure in specific neighbourhoods, but they do not substitute for the difficult work of increasing housing supply.
An Act that concentrates so much attention on short-term rentals while largely avoiding permitting reform, zoning reform and rental-market incentives risks changing headlines more than rents.
Greece provides a cautionary tale
Greece provides a useful reminder of why. The country’s housing problems were not created by Airbnb. During the sovereign debt crisis, residential investment collapsed. Demand has recovered, but supply has not. The predictable result has been rising rents and declining affordability, particularly for younger people.
Greece has also effectively conducted the experiment the Act now seeks to systematise. Since January 2025, new short-term rental registrations have been prohibited in several central districts of Athens. The measure was announced months in advance, creating a rush of registrations before it took effect. Yet rents continued to rise.
The reason is straightforward. Registration freezes create scarcity. A registration becomes a valuable asset that owners have every incentive to secure and retain, even if they are not actively using it. Rather than reducing the number of potential short-term rentals, such policies can encourage owners to register pre-emptively and hold those rights indefinitely. The result is often more licences on paper and little evidence of improved affordability.
The lesson to take from the Greek case is not that short-term rentals have no impact. They clearly do in certain locations. The lesson is that regulating a symptom cannot solve a shortage created by insufficient supply.
The Affordable Housing Act is incomplete
Measured against Europe’s real housing challenge, the Affordable Housing Act remains incomplete. Most importantly, it does little to make building easier. Admittedly, permitting and zoning largely remain national and local competences. Yet, the European Union has shown elsewhere, particularly in energy policy, that it is willing to impose deadlines and conditions when it considers an issue as a strategic priority. The housing package does not use those tools.
Nor does it do enough to mobilise Europe’s existing housing stock. Vacant homes appear mainly in accompanying guidance rather than in the legislation itself. Yet incentives, legal certainty and renovation programmes are among the most effective ways of bringing unused homes back into use. This is where the Act is at its weakest.
The wider European approach also contains a broader contradiction. While policymakers increasingly acknowledge supply constraints, public programmes often continue to boost demand through subsidised mortgages and other forms of financial support. Such measures are politically attractive, but when supply cannot respond, they risk pushing prices higher rather than making housing more affordable.
A red line worth watching
One element of the Act deserves particular scrutiny. Alongside short-term rentals, it discusses measures concerning the acquisition and use of homes for purposes other than primary residence, including requiring buyers to declare how properties will be used.
The Commission correctly emphasises that it creates no new powers and respects property rights. Nevertheless, by identifying restrictions on acquisition and use as a legitimate policy category, it risks normalising them. Regulating a commercial activity is one thing. Conditioning who may purchase a home and for what purpose is another.
Housing policy will remain primarily national and local, as it should. The Affordable Housing Act will not itself build homes. What it can do is help create the conditions for Europeans to build, renovate and rent to one another more easily.
For that, Europe still needs its genuine AHA moment: recognising that housing affordability begins with housing availability.
Until permitting becomes faster, vacant homes return to the market at scale and housing policy stops focusing on symptoms rather than causes, the continent may well find itself having exactly the same debate next year, only with worse numbers.