Short-term rentals driving housing crisis

Cyprus is not as drastic as Barcelona but locals are still being priced out of housing market

While Cyprus is not at the stage of the recent protests in Barcelona, the surge in short-term rental properties offered through platforms like Airbnb and Booking.com is posing significant challenges to the local hotel industry and rental markets.

Some view this trend as an inevitable evolution of the tourism sector, but others warn of its disruptive potential and call for urgent regulatory action.

Anti-tourism activists have staged increasingly heated protests in Barcelona and other tourist hotspots like Palma de Mallorca and some Greek islands, saying burgeoning numbers of visitors renting via Airbnb are driving up housing costs with residents unable to afford to live in city centres.

The general director of the Association of Cyprus Tourist Enterprises (Stek) Chrisemily Psilogeni said the situation is not as drastic in Cyprus for the time being, but she highlighted the disparity between regulated hotel accommodations and the largely unregulated short-term rental market.

“The number of self-catering accommodation now exceeds a third of the beds available in hotels and other tourist accommodations,” she told the Cyprus Mail.

According to Psilogeni, out of 14,446 short-term rental properties in the Republic, only 7,200 are officially registered and legally allowed to host guests as of June 2024.

“This means more than half of these guesthouses are operating illegally, creating unfair competition and driving up rental prices.”

The influx of short-term rentals is not just a concern for the hotel industry. Local residents, students and low-income families are also feeling the impact.

Psilogeni said that the proliferation of short-term rentals for tourists has significantly contributed to increased rents and the cost of living, making it difficult for many to find affordable housing.

“In several areas, especially those with high tourist traffic, the problem of finding accommodation has become acute,” she said.

Her concerns are echoed by hundreds of students across the island, who, especially throughout the summer months, scramble to find affordable accommodation.

“It’s a nightmare,” Giorgos, who is set to start his bachelor’s degree at Tepak in Limassol in September, told the Cyprus Mail.

“I know that Limassol is more expensive than other towns in Cyprus and has been for a while. But I never expected such prices. We are talking about studio apartments priced at over €1,000 per month,” he said.

“I worked summer jobs for past five years and saved some money, which I thought would cover my rent, at least for the first year. It turns out I still need my parents’ help to make it through, and it’s just wrong.”

Despite these concerns, some stakeholders believe that short-term rentals are the future of the industry. An official from the Ayia Napa municipality suggested that instead of combating the trend, the industry should embrace it.

“Saying that half of the properties on offer as short-term rentals are unlicensed is factually incorrect,” the official told the Sunday Mail.

“Of the more than 14,000 short-term rental properties on the market, around 11,000 have already applied for official registration. This proves that the market is on its way to being regulated, with bills and proposals in the pipeline to further legitimise the short-term rental industry.”

Yiannis Kotzias, general manager of operations at Phaedrus Living, also defended short-term rental properties, arguing that they cater to modern tourists who increasingly seek this type of accommodation.

“Short-term rentals create new jobs, generate direct and indirect revenue for the state, attract international investors, and provide local investors with a safe and profitable investment option,” he said.

Kotzias also dismissed the notion that short-term rentals are responsible for rising rental prices. “Market conditions, such as limited housing stock, soaring property prices in specific areas, and rising costs, have driven many to rent,” he explained.

However, not everyone is convinced. The Cyprus Real Estate Agents Registration Council has called on the government to ban short-term property rentals to help lower rental prices.

“This phenomenon is taking on alarming proportions and is largely responsible for the skyrocketing rental prices of houses and apartments, keeping them at high levels,” said the council’s head, Marinos Kineyirou.

“In a difficult period for Cypriot society, with inflation and high interest rates making home ownership difficult or even impossible, more and more people are turning to renting,” he added.

He also argued that the high demand for short-term rentals is reducing the supply of long-term rental properties, exacerbating the housing crisis.

“As real estate professionals, we know that many buyers and investors are acquiring new and used homes to rent them out on a short-term basis,” he said.

“Consequently, the supply will never meet the demand, keeping rental prices unaffordable for a significant portion of the population.”

Drawing on international examples, Kineyirou referenced Barcelona’s decision to prohibit short-term rentals from 2029, suggesting it as a model for Cyprus to consider.

While Psilogeni stopped short of advocating such drastic measures, she emphasised the need for effective regulation.

“We are not suggesting a total ban, but clearly, there are growing issues, both for our industry and for the people actually living in Cyprus, that need to be addressed urgently, before they get too big to solve,” she said.

Stek recommends several measures to improve the regulation of the short-term rental market. These include limiting the letting of properties to a specific period, not exceeding 90 days per year, particularly in city centres where housing shortages are most acute.

Psilogeni also suggested making the payment of an overnight stay fee compulsory and adopting health and safety regulations for short-term rentals.

“Collecting statistics from these platforms is crucial to have a true picture of tourist overnight stays on the island and to verify the correct declaration of income to the tax department,” she said.

Another proposed measure is to require the approval of the building management committee before an apartment can be rented out on a short-term basis. This is common in Airbnb hotspots such as Edinburgh.

“This would ensure that the interests of all residents are taken into account, and that the integrity of residential areas is maintained,” Psilogeni explained.

The debate over short-term rentals in Cyprus mirrors a global trend, where cities with high tourist traffic are grappling with similar issues. Many European cities have introduced their own strict regulations to balance the interests of residents and the tourism industry. For example, Paris allows short-term rentals for only 120 days a year, while in London and Reykjavik, the limit is 90 days. Amsterdam permits short-term rentals for up to 30 days and has banned them altogether in three areas of the city. In Barcelona, no new licences for short-term rentals are being granted, and a universal ban will take effect in 2028.

As Cyprus navigates the ongoing issue, stakeholders from all sides agree that a balanced approach is necessary.

“The goal should be to protect the quality of the country’s tourism product while ensuring that local residents can find affordable housing,” Psilogeni said.

“With effective regulation and cooperation between the government, the tourism industry, and short-term rental platforms, we can achieve a solution that benefits everyone.”