EU's Targeted Caps on Vacation Rentals May Ease Lisbon Rent Squeeze

Lisbon households squeezed by rising rents could soon get a helping hand from Brussels. The European Commission is preparing rules that would let city halls ring-fence neighbourhoods suffering from a surge of holiday flats, a move tailor-made for Portugal’s overheated coastal markets.

Quick Glance

• EU draft law coming in 2026 to give municipalities wider powers over alojamento local

• Lisbon and Porto already limiting licences but expect fresh tools such as caps on nights and seasonal moratoria

• Portugal’s house prices up 124% since 2015, the sharpest climb in the EU

• Economists see potential rent relief of 5-10% in saturated districts, yet warn supply shortage remains the core issue

• Tourism groups fear “one-size-fits-all” regulations could dent €20 B sector

Brussels turns up the heat on holiday lets

The new portfolio-holder for housing, Danish commissioner Dan Jørgensen, told reporters that the forthcoming package will focus on “areas under acute housing pressure” rather than imposing an EU-wide ban. Local councils would be empowered to apply night-caps, seasonal pauses, licence freezes and even green-light requirements for hosts who rent commercially. A parallel regulation on data sharing, approved earlier this year, obliges platforms such as Airbnb and Booking.com to transmit monthly booking figures, host IDs and revenue to national authorities from May 2026, laying the statistical groundwork for targeted curbs.

What it means for Portuguese boroughs

Portuguese mayors already wield significant leverage after Decreto-Lei 76/2024 restored municipal control over alojamento local last November. Lisbon used that latitude to redraw its map of “absolute” and “relative” containment zones, shrinking the maximum share of holiday lets to 10% and 5-10% of the residential stock respectively. Under the EU scheme, city halls could go further:

• declare micro-zones of pressure street by street;

• suspend fresh registrations for a set period;

• impose summer-only rentals and reserve the academic year for long-term tenants.Urbanists say such precision tools would prevent whole historic districts from turning into what one planner calls “tourist dormitories” while still leaving room for host income in less stressed quarters.

Economist viewpoint: will rents really fall?

Studies for the Commission estimate that holiday lets can account for up to 20% of the housing stock in high-demand capitals, pushing sale prices 3-7 pp above the trend. In Lisbon, analysts at Banco BPI calculate that every 1,000 flats switched from alojamento local back to residential leases would shave €1.20/m² off monthly rents. That said, construction bottlenecks, zoning delays and vacant second homes still trump short-lets as structural drivers of scarcity. Several economists caution that overly blunt restrictions risk simply encouraging owners to keep properties empty or sell rather than rent long term, limiting the benefit to residents.

Tourism lobby and host concerns

Portugal’s tourism confederation, which counts on €20 B in annual visitor spending, argues that family-run B&Bs cushion seasonality, especially outside Lisbon and the Algarve. Platforms warn that heavy-handed rules could erode Portugal’s reputation as an "easy-stay" destination and shrink tax receipts. Host associations are lobbying for grandfather clauses, gradual phase-ins and a clear distinction between casual sharers and professional operators. They also want Brussels to channel EU cohesion funds toward converting derelict public buildings into affordable housing, sparing private stock from tighter limits.

Next steps: timeline and how to have your say

The Commission will run a public consultation in early 2026, followed by an official proposal that needs approval from the European Parliament and the Council—a process that typically lasts 18-24 months. Portuguese municipalities, industry bodies and tenant groups have already begun drafting position papers. Citizens can upload comments via the portal Have Your Say on the EU website, while local forums planned in Lisbon, Porto, Faro and Funchal aim to gather grassroots feedback.

For residents priced out of their home neighbourhoods, the forthcoming rulebook is not a silver bullet, but it could give city councils the legal ammunition they have long lacked. Property owners, meanwhile, face a complex equation: embrace new limits and diversify income, or risk being sidelined as Europe rewrites the ground rules of the short-term rental game.