Budapest moves a step closer to short-term rental caps

Hungary: Hungary’s government, led by Prime Minister Viktor Orbán, has approved legislation that will pave the way for local governments to increase the regulation of short-term rentals in the capital city of Budapest.

Budapest’s mayor Gergely Karácsony has also thrown his weight behind the restrictions, which include capping the number of days property owners and hosts can rent out their apartments on a short-term basis or even ban the practice altogether in their cities. Posting on his Facebook page, Karácsony said the government was taking into consideration the best interests of Budapest’s citizens who had inherited a “severe housing crisis”, as well as its hotel industry, which has been heavily impacted by the Covid-19 pandemic.

Karácsony is backing Budapest to follow the lead of other European cities which have imposed tighter regulations on short-term rentals.

He said: “We need comprehensive regulation following the example of Amsterdam, Berlin or London that limits the period when entire apartments can function as hotels. Rents in the capital’s downtown are now out of reach even for a middle-class family.”

The topic has even brought together both sides of the political spectrum, with the liberal Karácsony siding with the incumbent right-wing Fidesz party in seeking to regulate the country’s short-term rental sector.

Spurred on by a desire to protect Hungary‘s hotel industry, a key revenue driver for the country’s tourism, the Fidesz party will be keen to address both the shortage of housing stock in Budapest and the surge in rental prices for apartments. The capital’s real estate challenges are already well-documented, with even middle class families claiming they are being driven out of the central districts due to unaffordable rents.

The government has monitored other European tourist hubs such as Amsterdam, Berlin, Prague, Paris and Barcelona, which have imposed regulations on rental properties with varying degrees of strictness. The former has taken the step of banning all rental platforms from listing in three districts in the city centre, while others have placed caps on the number of nights owners can host guests or eliminated tax favours for such platforms which have traditionally encouraged hosts to list their property to gain an extra revenue stream.

In the meantime, Colliers International reported that Budapest had one of the highest short stay market shares [20 per cent in terms of overnight stays] in Europe in 2018. Similarly, global real estate consultancy firm Knight Frank revealed that the city’s average property price rose by 16 per cent in the first quarter of 2020 compared to 2019, the second quickest growth rate among the 150 global cities it analysed in its case study.

The new rules are anticipated to be in place as early as next month.