Living. Living in a satisfactory house is one of the most important aspects of life. Housing is essential to meet basic needs, such as shelter, but it is not just about four walls and a roof. Housing must provide a place to sleep and rest, but also to feel safe, to have personal space, and to be able to raise a family: all these make a home. Immediately the question arises of whether people can afford adequate housing. The available data tell us that the housing problem is becoming increasingly worrisome, and that this is not only true for our country, where it is estimated that, beyond the difficulties of access to housing, the quality of available housing is largely insufficient for one and a half million families. The same issues characterize many countries throughout the European Union and other countries as well.
The housing market. The house is a commodity that is not easily reproducible or time-consuming to produce. The price of reproducible goods, in an industrial society, is determined by the unit cost of production; the price for non-reproducible goods is subject to the vagaries of supply and demand. Think of the price of a Panda car. The price is set by cost and international competition: if a buyer like Amazon comes along and suddenly requires many Panda vehicles for its corporate fleet, the supply of this car will increase, workers will be hired to produce it, but the cost and price will remain almost fixed. This is mot so for the housing market or for other non-reproducible goods such as an art painting or a long-aged wine.
If a new intermediary such as Airbnb that “facilitates” the matching of demand with supply for short rentals comes into the market, there will be a big increase in demand for housing and the price will rise rapidly. The supply will adjust slowly, but as the number of accommodations on the market is limited, rents will grow. A landlord’s compensation is determined by scarcity and is referred to as rent, not profit.
Some consequences and considerations:
1. Short-term rentals generate additional income opportunities, and residential properties can now be put to their most profitable use, i.e., short-term agreements. This can be seen as an efficiency gain that stimulates demand for housing, however, it raises house prices, while in the short run overall supply does not increase.
2. Short-term rentals consequently generate a reallocation of the existing housing stock, which shifts from the long-medium-term rental market (residents and students) to the short-term market, resulting in higher rents for all houses.
3. Tourist rentals can create negative externalities. Neighbors fear that the presence of tourists will lead to the transformation of the place where they live with the disappearance of neighborhood stores, association and life activities, services and more, and that tourists and tourist facilities will replace working class residents, a process that goes by the name of gentrification.
It can always be argued that the market works even for non-reproducible goods, by equalizing supply and demand, but it does not play any efficiency role in resource allocation, especially in the presence of negative externalities, nor does it have any welfare significance in a long-term perspective. Price merely certifies the momentary scarcity of housing, of the rare painting, of the fine wine.
In a tourist city with a high demand for short-term rentals, the demand represented by households to meet the primary need for housing services, given their income possibilities, is curtailed, with a loss of welfare for the community. The market is not an adequate tool for meeting social needs, and different allocative solutions are being sought. Several cities make use of supply-side instruments such as public housing construction, tax leverage and regulations limiting short rentals.
Hints of regulatory power regarding tourist rentals: parliament, region and municipality. According to the European Parliament all properties for tourist use must have a single code, a community-wide data collection process is strongly recommended, and transparency in the market is fostered (March 18, 2024).
The Italian parliament, with Decree No. 50/2017, introduced specific tax regulations for “short” (<30 days) rentals of residential properties. As of 2021 a flat rate tax can be applied if the taxpayer (physical person) has a maximum of four apartments on short-term rental: the rate is 21% on the first apartment, 26% on the others. For those with more than four apartments, business tax is applied.
Law 91 of July 15, 2022, included a provision aimed at Venice. Article 37a, “Measures to encourage the increase in the supply of rental housing for residents in the historic city of Venice,” allows the municipality to encourage the increase in the supply of rental houses for long-term residents in accordance with the principles of proportionality, transparency, non-discrimination and rotation, while protecting additional income for those who carry out this activity by renting a single unit. Furthermore, the law gives the municipality the power to intervene by limiting the period of short-term rental to 120 days and allows the municipality to place restrictions on the number of properties intended for tourists by city zones.
There is also a competence of the region in this area, which was reaffirmed by the Constitutional Court in two rulings, nos. 84, 2019 and 94, 2024. The Veneto Region had ruled on the matter in 2013 (No. 11, June 14) with a law based on the assumption that tourist rentals concern properties that are not classified as “accommodation facilities” and are therefore subject to simplified procedures. The region is committed to preparing strategic plans on tourism, and in the very annex to Resolution no. 41 of March 22, 2022 on the strategic plan for tourism 2022-2024, we read heartfelt words describing how the Veneto came “from a period happily oriented to the ‘promotion’ [of tourism] and it [had] not yet developed suitable tools towards ‘overtourism’ and the flows of ‘day tripper’ tourists”….complaining about the sale of poor quality products and a subservience to the “Market God.” These inflexible arguments were not followed up by anything.
Will the Municipality of Venice, which was finally given the power to intervene, have remedied the situation yet? Not a chance. On Oct. 24 of this year, the Council (given the presence of the UNESCO mission in the city) initiated discussion of a proposal for “Regulations for the conduct of rental activities exclusively for tourism purposes for a period exceeding 120 days even non-consecutive per calendar year.” The 120-day limit is waived in case the landlord engages in a series of “good manners”: guests must be welcomed in person, colored garbage bags must be provided, emergency telephone numbers must be displayed and the like. Let’s guess how this will work out! Polite owners and the “Market God,” as the regional tourism strategic plan calls it, can rest easy.
With greater incisiveness, last Dec. 31, 2024 the Region of Tuscany promulgated the Consolidated Tourism Act (Law No. 61) which provides specific criteria (Art. 59) for short-term rentals for municipalities with high tourist density (Istat): residences, environmental sustainability, and urban structure must be protected. Among the criteria is the possibility of limiting rental permits to 5 years, whether exercised in entrepreneurial or non-entrepreneurial form. Last Oct. 2 the Florence City Council approved a resolution to prohibit the use of properties declared for residental use in the city’s historic center, a Unesco-listed area to move to short tourist rentals, and provided for the cancellation of the Imu tax on second homes for three years for those who would give up tourist rentals in favor of ordinary rentals.
The facts. About 48,000 residents live in the historic center of Venice today and there are about 50,000 beds for tourist use, separated into 23,000 in the 5,770 tourist rentals and 27,000 in hotels and other facilities. The increase in beds located in tourist rentals was very strong in the three years 2016-2019 with the emergence of the Airbnb platform, which has seen the number of beds registered on the site nearly double, with an annual rate of increase of just under 30 percent. Such a rapid increase can result only in small part from the renovation of previously uninhabitable housing. Houses formerly inhabited by residents or students are turned into tourist rentals with relatively minor adaptations, without changing the property’s classification, which remains “residential.”
The legislative interventions that have promoted tourist rentals have done so based on the assumption that it is, for the most part, an activity that generates supplementary forms of income for Venetians. However, this assumption is untrue: tourist rentals are economic activities in their own right, very often headed by individuals who own multiple accommodations. The available data are not what one could hope for: they refer to hosts, who do not coincide with the owners, but they can help to sketch the coordinates of the phenomenon. In 2019, according to the date of the Inside Airbnb survey, 71 percent of the portal’s listings in Venice were from multi-housing hosts, typically professional business owners. The data, in fact, shows that hosts who indicate only one accommodation on the short-term rental market represent a minority, and within the multi-hosts, moreover, “corporate hosts,” i.e., professional operators, businesses that make the tourist rental of apartments a real economic activity, are gaining ground. In total, corporate-hosts manage 30 percent of all properties put up for tourist rental.
Nor is the assumption of the sharing economy, upon which Airbnb was originally founded, verified, because in 76 percent of the accommodations offered in the municipality, the listing refers to the rental of entire apartments in which no one lives, and therefore it is not sharing. Nor are they occasional activities, since most of the listings refer to apartments available for long time intervals.
Tourist rental is very profitable: the added value of the municipality of Venice due to tourism is estimated to be around 3 billion, of which about 1/10 can be attributed to tourist rentals (quoting Istat, The Satellite Account of Tourism). The average cost for an overnight stay is now €224 in the municipality, with peaks of €300 in the historic city. In addition to the wealth produced by this activity, it is important to understand its distribution. In 2019, 5 percent of multihosts shared 34 percent of the profits generated through the platform. In some cases multihosts simply offer brokerage services for the owners, and they do this even if they are located far from Venice, for example handling check-in and cleaning of the accommodations in exchange for a share of the proceeds, usually around 30 percent. There are hosts with foreign addresses, in London, Paris, the Mauritius, San Francisco, Chicago, Boston, and other cities. Therefore, a large part of wealth is probably concentrated in the hands of a few.
The Venetian data show that the “richest” host offered 130 accommodations, all in the historic center. The second advertised 118. The third 81. There are 1809 lodgings, 30 percent of the total, that refer to hosts that manage more than 10 lodgings each, and are likely to be traced back to “agencies.”
Another phenomenon is due to tourist apartments, which are actually managed by hotels. The apartments in question use various hotel services, from reception to breakfasts, from reservations to housekeeping, but maintain their residential zoning, thus configuring a clear circumvention of the municipal ban on opening new hotels. In the central “sestiere di San Marco” tourist rental beds have increased by 25% in the last 5 years, while hotel and non-hotel establishments have lost about fifty beds. Actually, this has not been the case, because entire “residential” buildings are run by hotels. Examples are Rosa Salva Hotel (adds 13 beds through tourist rentals), Palazzo Paruta (+9), Egò Boutique (+13), Savoia and Jolanda (+7) and many others in this and other “sestieri”.
Then there is the case of some institutions that have earmarked some converted apartment buildings for tourist rentals in defiance of Article 42 of the municipality’s building regulations, which requires that in buildings consisting of several units, there may be more than one B&B or tourist rental activity as long as “they are not in physical communication with each other or placed in direct continuity.” This article expresses the desire to prevent tourist hospitality from being installed predominantly, if not exclusively, on the same floor of a building or in an entire building in order to preserve residential life. One building is owned by the Bank of Italy (12 tourist flats for 54 beds), one by Assicurazioni Generali (19 with 81 beds) one by Alfasigma (9 with 39 beds). Banca d’Italia is a public institution that, apparently, has no problem contributing to the controversial phenomenon of tourist rentals, with its heavy social repercussions. It is disturbing then that Generali, creators in 2017 of The Human Safety Net foundation with the aim “to help people build a safer and sustainable future by taking care of their lives and dreams,” does not perceive the clash between such words and the reality of the facts it has helped create. In fact, sustainability means ensuring the social cohesion of the community, and residency is its prerequisite, unregulated tourist rental the antithesis. We are sorry to see Querini Stampalia among the foundations which could perhaps make renting to residents an example of protection of the city social structure, instead of making cash through a few tourist rentals, and impoverishing the city.
Conclusion. There are numerous abandoned and dilapidated empty houses in Venice. Public housing is very marginal, and the market is left in the hands of buyers, in many cases, foreigners. It is a thriving, profit-grinding market where prices in valuable areas are skyrocketing, which has marginalized the demand to allocate rental housing to students and residents.
It is said that demand from residents is low, that the inhabitants of Venice have shrunk to 1/3 of what they were 50 years ago due to a multiplicity of factors much discussed, and that abandonment of the city preceded the surge in tourist arrivals in recent decades. All this is true, however, there is a demand from residents of Venice who work in the city, from students, from those in music, in the the performing arts. Then there is a growing demand for housing from workers who work remotely for long periods of time with digital technologies and who wish to spend part of their lives in Venice. This is a demand that needs to be enhanced, created, and that is based on a different city project. It is on the basis of this project that a public intervention in the real estate market assumes significance.
The development of economic activities that are compatible with the city’s role in the economy and culture should be encouraged, dedicating spaces to co-working activities, to the formation of start-ups in Venice, activities that transform those who live there from users of the city to participants in its life. Recall the Venywhere experiment, which had excellent initial results, but closed due to the difficulty of finding housing: the demand from “digital nomads” was there, the city proved strongly attractive, but houses were just not available!
It is also necessary to promote living in the city for students who present interesting activity projects, which are co-financed, with the possibility of developing the capital they have built with their studies in the cultural or artistic sphere, by ensuring that they can participate in the allocation of subsidized housing, to a limited extent, next to the less affluent. It is necessary to think of spaces that enhance experiences related to the medical pole that should be built on the Lido, a port that has overcome hesitations and finally decided to face the sea, but is also developing a set of logistical activities that will strongly link it to the territory, the backport, the Northeast, and Central Europe, with activities that can take place on the old docks and revitalize the city, bringing new energy. And think of many other activities in connection with universities and other institutions of higher education, classical studies with respect to which life in Venice constitutes a unique experience and which can easily be enhanced. A tourist presence can coexist and be a valuable resource for many of these practices, if it is kept within appropriate development tracks and does not upset the social balance of the city.
(Thanks to A. Corona and G. Menegus for info and suggestions. Please visit www.ocio.venezia.it for further discussion).
Cover Image: An Imaginary Venice
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