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The housing crisis is no longer a concern limited to Europe’s major cities, it is increasingly affecting Estonia as well. Ramon Rask, Partner and Attorney-at-Law at RASK Law Firm, notes that as early as 2026 we will begin to see the first regulatory measures aimed at improving access to residential housing. The first such step will be a European Union regulation entering into force this spring, focusing on the collection and publication of data related to short-term rentals.

Root cause of the crisis: insufficient supply

“The core of the housing crisis lies not in demand, but primarily in a lack of supply. The real estate market has not seen a sufficient increase in affordable residential rental housing,” Rask explains.

Over the past decade, housing prices in Europe have risen by 53% and rents by 21%. In Estonia, the corresponding figures are 109% and 58%. Construction costs have increased by approximately 23% across Europe since 2021, while the number of building permits issued has fallen by 22%. According to Rask, these factors significantly hinder the expansion of the housing stock.

The crisis especially affects younger people and those with lower incomes. “Nearly 8% of the EU population spends more than 40% of their income on housing, and in younger age groups this figure exceeds 10% in some cases.” To alleviate the housing shortage, Europe would need an estimated 2 million new homes per year, along with annual investments of around €150 billion.

Airbnb, Booking and other platforms have reshaped the rental market

Across Europe, the rapid growth of the short-term rental market is seen as a major amplifier of the housing crisis. Many apartments that were previously available for long-term rental have shifted into hotel-like use through platforms such as Airbnb and Booking. “From a policymaker’s perspective, this portion of housing has effectively disappeared from the market—it exists, but not for living,” Rask says. In major European cities, an average of 15–20% of housing stock is used for short-term rentals; in some cities, such as Paris and Rome, the share is even higher.

Statistics confirm the explosive growth of short-term rentals. In 2019, platform-based overnight stays in the EU (based on data from the four largest platforms) totaled 512 million; by 2024, this figure had risen to 854 million. “This accounts for roughly one-third of all tourist overnight stays in the European Union. In Estonia, the short-term rental issue is felt most acutely in Tallinn’s Old Town,” adds Co-Head of RASK’s Construction and Real Estate practice.

As a result, many cities have independently introduced restrictions on short-term rentals. In certain zones in Amsterdam, for example, apartments may be rented out short-term for a maximum of 30 nights per year. Barcelona has announced plans to abolish all tourist apartment licenses by 2028. New York has imposed data collection and registration obligations on platforms.

The EU’s plan: regulation, investment and protection of vulnerable groups

In 2024, the European Union appointed a Commissioner with a clear mandate to address energy and housing issues. Later that year, the European Commission established a special housing crisis task force (HOUS). Over the following year, the situation was mapped out, culminating by the end of 2025 in a plan built on four pillars:

1. Increasing supply by simplifying and accelerating planning and permitting procedures.

2. Investments aimed at channeling substantial public funding into residential real estate.

3. Regulation of short-term rentals, beginning with systematic data collection and followed by the introduction of necessary restrictions.

4. Protection of vulnerable groups, with particular support for young people, students, and key workers.

“Public investment in residential real estate is the EU’s most powerful lever and is likely to have the greatest impact on the market. This will create a publicly funded rental market alongside the traditional private rental sector,” Rask explains. Several countries, including the Czech Republic, have already piloted such models to provide affordable rental housing.

A key regulation enters into force on 20 May 2026

For Estonia, the most immediate impact will come from the EU regulation entering into force this spring, requiring the collection of data on short-term rentals. Unregistered apartments may no longer be listed on platforms, and platforms will be obliged to verify compliance.

Although Member States retain some discretion over how the system is implemented, this flexibility is limited. “If a country chooses not to implement data collection, this could restrict access to other forms of support in the future, such as energy-efficiency subsidies. These issues are likely to become interconnected – for example, if you want funding to improve a building’s energy efficiency, you may also have to accept restrictions on rental conditions within that building,” Rask notes.

He adds that registration requirements for short-term rentals are likely to be followed over time by additional national compliance obligations, such as meeting evacuation and fire-safety standards.

Public funding will reshape the market

RASK’s Partner Ramon Rask believes that, following the European example, Estonia has a growing opportunity to use EU funds not only for renovating apartment buildings but also for creating new housing stock. One potential option, in his view, would be converting vacant office buildings in central Tallinn into residential rental units, largely supported by European funding.

“Public money will enter the Estonian market, creating opportunities for smart developers to build affordable housing. This will compete with the traditional real estate market and influence both prices and accessibility,” he predicts.

Short-term rentals will lose their dominant status

According to Rask, it will no longer be sensible in the future to base a business model solely on short-term rentals. “Their role will become more structured and diminish, with some apartments returning to the long-term rental market. Hotels will become more competitive, and tourists will once again primarily choose hotels,” he says.

Overall, Europe and Estonia alongside it, is moving toward a new phase in the housing market, where public funding, regulation, and restrictions on short-term rentals will significantly reshape the status quo. The first changes will reach Estonia as early as this year.