Combating the long-term rental housing shortage constitutes an overriding reason relating to the public interest

The Services Directive forbids prior authorisation of service provision unless it is justified by an overriding reason of public interest. The Court judged that combating short-term rentals that have a significant inflationary effect on rent levels and exacerbate rental housing shortages constitutes such public interest.

The Directive states that even when it is justified by an overriding public interest, the measure must be proportionate, meaning that it must not be more than what is necessary to protect that public interest. The Court judges that in this case prior authorisation is proportionate, because:

  • Anything less restrictive than prior authorisation such as a system by which the landlord would have to declare the short-term rental and could suffer penalties in the event of non-declaration, is not good enough to enable the authorities to "put an immediate and effective end to the rapid conversion trend which is creating that shortage" (see in epf20-26 of 07.04.2020 the Advocate General's scepticism about alternatives such as taxes or caps on overnight stays or maximum proportion of premises that can be short-term rented).
  • There is no authorisation requirement for rental in the lessor's main residence, as that has no impact on the long-term rental market.
  • It is limited to densely populated areas with extreme rental shortages and even there, local authorities can limit authorisations to the really problematic neighbourhoods.
  • There is flexibility concerning the offset requirement (linking authorisation to converting commercial premises to long-term housing). The municipal council can decide not to require it or how big or small the offset needs to be and if it does require it, it must ensure that the requirement is strictly relevant to the specific situation not just of the municipality as a whole but of each neighbourhood or district (this is what the Advocate General was referring to when he wrote that the French Republic had "incorporated proportionality into the design" of the authorisation procedure).

Full Secretariat report under epf20-68 of 25.09.2020