How Much Short-Term Rental Growth Is Too Much for Local Housing Markets?

The short-term rental (STR) market has undergone a profound transformation

The short-term rental (STR) market has undergone a profound transformation over the past two decades, driven largely by the rise of digital technologies and online booking platforms. These platforms have made it easier than ever for individuals to offer accommodation services, fueling a sharp increase in the popularity and availability of STRs across Europe.

A recent report from Horwath HTL takes a deep dive into this evolving market, analyzing trends at both the national and capital city levels across Europe. The study highlights how the growth of STRs is reshaping the hospitality landscape while raising critical concerns for local communities, regulators, and policymakers.

A Growing Concern for Popular Destinations

This boom in STRs has not come without consequences. Many of Europe's most visited destinations are beginning to feel the strain of the sector's rapid expansion. The report outlines key challenges affecting environmental, social, and governance structures:

• Urban residential areas are increasingly dominated by short-term rental units, reducing the availability of long-term housing for local populations.
• Rapid and often unregulated real estate development is altering the character of neighborhoods.
• The growth of STRs has contributed to a rise in informal economic activity, often bypassing taxation and regulatory frameworks.

As a result, many once-vibrant local communities are seeing their populations displaced, leading to a loss of cultural authenticity and long-term livability.

Regulation at a Turning Point

Governments and municipalities across Europe now find themselves at a crossroads. Some have already begun implementing restrictions on the issuance of new STR licenses, as well as tightening rules on existing ones. These policy shifts reflect a growing consensus: while STRs offer economic opportunities, they must be balanced with sustainable urban development and the protection of local communities.

Horwath HTL’s report emphasizes the need for robust regulation that can help manage the STR market's growth while mitigating its negative side effects. The analysis offers a framework for stakeholders to assess the health of their local STR ecosystems and consider appropriate policy responses.

About Horwath HTL

Horwath HTL is a global consulting firm specializing exclusively in hospitality, tourism, and leisure. With expertise in every facet of hotel real estate investment and development, the firm brings over 100 years of industry knowledge to each client engagement. Operating out of 52 offices in 40 countries, Horwath HTL has executed more than 40,000 assignments worldwide for both public and private sector clients.

As a member of the Crowe Global network—a top-ten global accounting and financial services organization—Horwath HTL is a trusted advisor for companies and financial institutions looking to develop and invest in the hospitality sector.

Written by Horwath HTL. Originally published on Hospitality Net, April 28, 2025.