Rentals, Airbnb and vacant houses

The Greek government’s intervention in the short-term rental market was anticipated with great interest by three interested parties: small property owners who advertise them on platforms like Airbnb; hoteliers who complain about unfair competition in the tourism market; and ordinary citizens who are looking for a home and cannot afford today’s prices. The anxiety ended last weekend, but only for the first two categories mentioned above.

“Yes, we want the short-term rentals. It is a competitive product that supports the economy and the income of property owners. However, in various regions of the country, rents have skyrocketed and competition has also been distorted, especially in tourism,” Prime Minister Kyriakos Mitsotakis said at the Thessaloniki International Fair, announcing the imposition of a 13% value-added tax – along with fees applicable to tourist accommodation – on those who own and rent out more than two properties on those platforms.

This measure makes sense as a partial response to the calls of hoteliers, who sought to restore fair competition. In addition, it ends uncertainty for the short-term rental industry, which had good reason to be concerned about scenarios such as the implementation of a cap on the number of beds per area. It is, however, a measure which does not deal with skyrocketing housing costs.

The government could use the revenue from the VAT on short-term rentals to redevelop and utilize homes that are currently unused

Let’s be honest: The income from short-term rentals – almost 700 million euros – is valuable for the government, especially when it has to manage additional costs for the restoration of Thessaly after the deadly floods. Besides, short-term rental offers a good income for small owners and real estate professionals. However, nothing prevents the government from taking parallel steps to supply the market with extra properties.

One intervention would be to incentivize the development of vacant homes – about 700,000 nationwide. They could, for example, use the revenue from the VAT on short-term rentals to redevelop and utilize homes that are currently unused. Since the prime minister has attributed the spike in rents to – among other reasons – Airbnb, one would have expected to hear from the government some initiative in this direction. Because rents will not go down.

Real estate in Greece is not expensive compared to other European countries. However, a price rally – almost 50% – within a few years has created many side effects, which should be countered with an aggressive policy of utilizing vacant properties.