A history of Lisbon: short-term rental platforms and the housing market

Across Europe, many mayors have argued that home rental platforms such as Airbnb are pushing residents out of city homes. Lisbon is an interesting case study on how to regulate this market. The median real estate price per square meter in the city increased by more than 70% between the first quarter of 2016 and the last quarter of 2019. The number of overnight stays in Lisbon reached more than 11 million in 2019, approximately 20 times its resident population . . João Pereira dos Santos writes about the causal impact of short-term rental regulations on the housing market and suggests policy implications.


According to The Guardian, in June 2019, the mayors of ten European cities asked the European Union to help them deal with the negative impact Airbnb and other vacation rental sites have on their cities. These platforms, they argued, charged residents outside of city housing. The mayors were reacting to a ruling by the Advocate General of the European Court of Justice, who issued a non-binding opinion expressing that Airbnb should be seen as a digital information provider rather than a traditional real estate agent. They understood that this decision could prevent them from regulating the presence of Airbnb in their cities. Nonetheless, several cities around the world have implemented measures to curb the growth of short-term vacation platforms, including Amsterdam, Barcelona, ​​Berlin, Los Angeles and New York.

The mayor of Lisbon was not among the subscribers to this letter, possibly because as of June 2019, Lisbon was already in its seventh month of imposing restrictions on short-term vacation rentals. Indeed, in November 2018, the municipality of Lisbon had banned new property registers for the short-term rental market in certain historic districts of the city center. The registration of the accommodation is a mandatory step to advertise the property on the vacation rental platforms. Renting unregistered accommodation is punishable by a fine.

The capital of Portugal is a particularly interesting case study because it has seen a very rapid increase in property prices in the recent past, and it has also hosted a tourism boom. Between the first quarter of 2016 and the last quarter of 2019, the median property price per square meter in the city of Lisbon increased by more than 70%. The World Travel Awards elected Lisbon as the top city break destination in the world in 2017, 2018, 2019 and 2020. The number of overnight stays in Lisbon reached over 11 million in 2019, roughly 20 times its resident population.

More recently, the mayor of Lisbon wrote an open letter in The Independent reassessing post-pandemic priorities: rental prices, emptying communities and threatening its uniqueness. However, the mayor had not always been in favor of curbing the growth of these platforms. In 2016, when Airbnb’s listings in the Lisbon metropolitan area had nearly tripled since January 2014, he told Bloomberg: “This is the first time that tourism has enabled many people to participate in the development process of the city. We shouldn’t be afraid of this new dynamic; we shouldn’t be afraid of growth. On the contrary, we must prepare the city to welcome even more tourists.

In a recent working paper, my co-authors and I take advantage of the ban put in place by the Municipality of Lisbon in November 2018 in certain neighborhoods, which provides an ideal framework for estimating the causal impact of rental regulations. short term in the housing market. We rely on the fact that the ban was extended a year later to some adjacent areas to quantify the impact of this ban on registries, Airbnb prices and the Lisbon city real estate market. We use two administrative datasets on short-term rental records and real estate prices and transactions, as well as data pulled from the web on Airbnb rental listings and prices.

We document a peak in new records in the areas initially treated of 30.9%, between the announcement and the implementation of the ban, driven by the national historic owners, following the approval of the law. This shows that the anticipation of the policy due to its wide public debate has allowed historic owners to enter the market in the very last few weeks when it was allowed. Airbnb quantities and prices do not appear to be responding to the ban in the short term. Regarding the real estate market, there is a drop in demand for houses in the treated areas, in particular two-bedroom apartments, leading to a 20% contraction in transactions. vis à vis comparison areas. Prices have fallen by 8%, showing that the ability to rent housing in the short-term rental market is an important determinant of demand, at least in tourist areas.

The following policy implications apply. First, it is important to be cautious about long periods of anticipation of discussions of zoning bylaws that create occupancy rents. Second, we provide causal evidence that a short-term rental ban is slowing the housing market. This effect is concentrated in certain types of properties, notably two-bedroom apartments. However, our estimates suggest that sharing economy platforms, despite their importance, are not the full story behind the spectacular housing market boom in the city of Lisbon.

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