The regulation proposed by the European Commission on 9 September has been read as a crackdown on short-term lets. For institutional investors another provision matters more: the power to restrict purchases of homes not used as a primary residence.
On 9 September the College of Commissioners adopted the proposed regulation on housing affordability and availability, the Affordable Housing Act. Italian debate since has focused almost entirely on short-term lets. The operators' association warned of damage to tourism, Federalberghi welcomed the text, and the estate agents' federation Fimaa called it an intrusion on property rights.
The proposal reaches further than holiday rentals. It allows competent authorities to restrict the purchase or use of residential land and property not bought or used as a primary residence, regardless of who occupies it. That covers a private second home. It also covers a commercial buyer acquiring an entire building.
Declaring housing pressure
The regulation imposes nothing. It sets common criteria under which a state, region or municipality may declare an area under housing pressure and only then adopt restrictions that are data-backed and proportionate. The area can be a municipality, a metropolitan city or a single neighbourhood.
According to early trade-press accounts, thresholds revolve around the ratio of average house price to average annual income: eight times if the ratio has risen steadily over the past decade, ten times with no further condition, plus a forward assessment showing no improvement within three years. These parameters need checking against the final text.
The Commission cited rents rising 59% in Berlin, 75% in Madrid and 103% in Lisbon over ten years.
Where investors are exposed
Professionally managed rental housing has been one of the few growth segments for institutional capital in Italy, concentrated in Milan and, to a lesser extent, Rome, Bologna and Florence, the cities most likely to breach the thresholds in at least some districts.
An investor buying a building to let long term produces primary residences for tenants. If the rule targets use rather than buyer type, as the wording suggests, build-to-rent would fall outside its scope. The wording still leaves room for interpretation: a municipality might target block acquisitions followed by refurbishment and rent repositioning.
The nearest precedent is Dutch. Since 2022 municipalities in the Netherlands can ban, in defined zones, the purchase of homes below a value threshold for letting, and several cities have done so, Amsterdam and Rotterdam among the first. An EU legal basis would lower the litigation risk of such measures, and therefore make them more likely.
Timing and due diligence
As a regulation, once adopted it applies directly across member states. The legislative process will take time, and in Italy the governing parties have already voiced criticism.
The practical effect is already visible in due diligence. A fund appraising a residential scheme in a semi-central Milan district with a seven-year exit must consider that, mid-hold, the city may acquire a tool it lacks today.
Running income would be untouched. Exit liquidity would not, because a building saleable only to owner-occupiers has a narrower buyer pool.
How likely that municipality is to use the tool is hard to estimate. Its effect on exit price can be calculated, and through that calculation the regulation starts shaping valuations before it is even adopted.