'Mid-term rentals': the new haven for investors to keep ahead of housing regulations

As traditional hotels become increasingly expensive in popular tourist destinations, short-term rentals, particularly those listed on platforms like Airbnb, have surged in urban areas across Europe. This rapid expansion has put immense pressure on the housing market, displacing residents in their own neighborhoods. Local governments have begun to act against this trend, implementing various regulations such as licensing restrictions and night caps to control the growth of short-term rentals.

The rise of short-term rentals has not only squeezed the profitability of housing investments but also created a new opportunity for investors through 'mid-term rentals.' These rentals, typically lasting from 30 days to one year, have gained traction due to increasing student and worker mobility. Investors are finding that this segment often falls through regulatory gaps, making it a lucrative option. While the EU is working on regulations for short-term rentals, the lack of a unified approach may exacerbate the ongoing housing crisis for residents.

Short-term rental platforms like Airbnb were initially hailed as part of the "collaborative economy," offering homeowners a way to monetize unused space. However, the professionalization of these short-term rentals, where properties are purchased for profit rather than shared, has sparked concerns. In major cities like Paris, over 91,000 listings are available, with significant concentrations of short-term rentals contributing to housing shortages. In Spain, for instance, short-term rentals make up 20% of the housing stock in Madrid and 10% in Barcelona.

In response to the pressures caused by short-term rentals, many cities have enacted measures to protect long-term housing availability. For example, hosts are now required to register their properties, and penalties have been imposed for illegal listings. Cities like Paris and Amsterdam have introduced night caps to limit rental days per year. However, despite these efforts, a significant percentage of listings still lack proper licenses, particularly in Madrid and Barcelona, indicating challenges in enforcement.

As regulations tighten on short-term rentals, investors are pivoting towards mid-term rentals as a more stable and less regulated alternative. The French Bail Mobilité contract allows for rentals longer than 30 days without requiring a license, making this segment very appealing. Reports indicate that during events like the Paris Olympics, demand for mid-term rentals surged, allowing property owners to charge premium rates for short stays.

Mid-term rentals are increasingly being recognized as a viable investment option, particularly in cities like Paris and Berlin. Research has shown that the proportion of mid-term rentals has grown significantly in recent years, from 1.9% of the total housing stock in Barcelona in 2018 to 7.1% in 2023. This trend is further fueled by a post-COVID-19 increase in remote work, leading to a greater demand for flexible accommodation.

The ongoing pressures from short-term rentals continue to strain housing markets across Europe, necessitating a comprehensive regulatory approach. The adaptation of investors to capitalise on mid-term rentals illustrates the complexities of the housing crisis. A holistic strategy is essential to ensure the accessibility and functionality of housing markets, particularly in high-demand urban areas. As the situation evolves, it remains to be seen whether governments can effectively address these challenges.