A city can fill its hotels, attract billions in investment and become one of the world's most desirable places to visit, yet become increasingly difficult for its own residents to afford. The restaurants need workers, the hospitals need nurses, the schools need teachers and the transport system needs people to keep it running. But where are these people supposed to live when the city they serve is priced beyond their reach?
From Lisbon and Barcelona to London and New York, housing affordability has become a defining challenge of urban growth. Tourism brings spending, international investment creates opportunities and rising property values can build wealth. Yet these same forces can intensify competition for housing when construction and affordable rental supply fail to keep pace.
The question is no longer simply how cities can attract economic activity. It is whether they can sustain that success without pricing out the people who make it possible.
When Popularity Becomes Pressure
The scale of Europe's housing challenge is significant. The European Commission reports that house prices across the European Union rose by more than 60% between 2013 and 2024, while average rents increased by around 20%. The Commission identifies insufficient housing supply, construction costs and growing demand as important parts of the problem.
Tourism and investment are not inherently harmful to housing markets. The problem arises when properties that could accommodate permanent residents become more profitable as holiday rentals or investment assets, while too few additional homes are built.
Lisbon illustrates this tension. According to the International Monetary Fund's 2026 assessment of Portugal, national house prices rose by 180% between 2015 and the final quarter of 2025.
These figures concern Portugal as a whole, not Lisbon alone, and they do not mean foreign buyers caused all the price increases. However, they illustrate how additional purchasing power can put pressure on markets where local incomes struggle to keep up.
Research offers further evidence of the relationship with tourism. A peer reviewed study of Portugal found that a one percentage point increase in Airbnb's share of properties in a municipality was associated with a 3.7% increase in house prices during the period studied. The effects were particularly pronounced in historic centres and tourist areas. The findings demonstrate how converting residential properties into tourist accommodation can add pressure to already constrained markets.
The Cost of Success
Barcelona presents another side of the problem. In 2025, the city welcomed 16 million tourists, generating an estimated €10.376 billion in direct tourism expenditure. Across the wider Barcelona destination, including surrounding areas, tourism spending reached approximately €14 billion.
Tourism clearly contributes substantial economic value. Hotels, restaurants, cultural venues, transport providers and countless local businesses benefit from visitors. But that revenue does not automatically translate into more affordable homes for the people working in those businesses.
Barcelona's own housing data shows that average monthly rents have remained above €1,000 since 2022. Nominal rents have increased by more than 50% over the past decade, substantially outpacing inflation. In response, the city plans not to renew 10,101 licences for tourist apartments in 2028, aiming to return those properties to residential use.
Whether this will improve affordability depends on what happens to those homes afterwards. Returning properties to the residential market does not guarantee that they will be rented at prices local households can afford. The policy addresses one source of pressure, but the wider shortage still requires attention.
Beyond Tourism: London's Warning
London demonstrates why tourism cannot be the sole explanation for the housing crisis. High housing costs also reflect limited supply, strong employment demand, land prices and years of pressure on the rental market.
According to Trust for London, the average monthly rent for a privately rented one bedroom home in London was £1,620 in 2024/25, compared with £1,090 in the rest of England. Separate figures show that renting an average one bedroom home requires around 52% of typical pre tax earnings in London.
These costs affect more than household budgets. Workers may have to move farther from their workplaces, increasing commuting time and expenses. Employers can find it harder to retain staff, while neighbourhood businesses risk losing the residents who provide their regular customer base.
A city can continue attracting employers and investment while gradually making itself less accessible to the workforce that supports its economy. That is not simply a social concern. It can become a constraint on the city's long term competitiveness.
A Different Approach to Property Wealth
New York offers an example of how governments can respond to one part of this challenge.
In May 2026, New York introduced an annual surcharge on certain high value properties that are not used as their owners' primary residences. The measure, associated with Mayor Zohran Mamdani and Governor Kathy Hochul, targets qualifying second homes and other nonprimary residences. The mayor's office projected that it could generate approximately $500 million in annual revenue to help address the city's budget gap.
The distinction matters: this is not a tax on every empty property, nor does the projected revenue mean the city's deficit has already been eliminated. It is a fiscal measure intended to raise revenue from a particular category of valuable property ownership.
“The law has changed who may buy. Good advice will decide who buys well,” said Mohamad Rabih Itani, Co-Founder and CEO of Land Of The Braves. New York's wider housing shortage remains severe. Its 2023 Housing and Vacancy Survey recorded a rental vacancy rate of just 1.41%, meaning that only around 33,000 rental homes were available across a city with more than 2.3 million rental units.
A surcharge alone cannot solve that shortage. Its potential contribution depends partly on how the revenue is used, while affordability also requires more homes and a sufficient supply of housing accessible to ordinary households.
Measuring a City's Success Differently
No single policy can resolve the housing crisis. Cities need to build more homes, expand affordable and social housing, enforce appropriate short term rental rules in high pressure neighbourhoods and ensure that property related revenue supports public needs.
They also need to reconsider how they measure economic success. Visitor numbers, property values and investment totals tell us how much activity a city attracts. They do not tell us whether a teacher can afford to live near the school where they work or whether a young professional can build a life there without spending an unsustainable share of their income on rent.
This is where the debate needs to move forward.
Residents are not simply beneficiaries of a city's economic success. They are part of its economic infrastructure. They staff its hospitals, teach its children, operate its restaurants and sustain the neighbourhoods that visitors come to experience. When those people can no longer afford to stay, the city risks undermining the very foundations of its prosperity.
The real measure of a city's success is not only how many people want to visit it or how much investors are willing to pay to own a piece of it. It is whether the people who keep it running can still afford to call it home. Housing affordability is not an obstacle to urban prosperity. It is one of the conditions that allows prosperity to last.
References:
The European affordable housing plan. (2024). European Commission. https://commission.europa.eu/topics/employment-and-social-affairs/affordability/affordable-housing_en
International Monetary Fund. European Dept. (n.d.). Portugal: 2026 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Portugal.https://doi.org/10.5089/9798229051422.002.a001
Franco, S. F., & Santos, C. D. (2021). The Impact of Airbnb on Residential Property Values and Rents: Evidence from Portugal. Regional Science and Urban Economics, 88, 103667. https://doi.org/10.1016/j.regsciurbeco.2021.103667
Destination Barcelona closes 2025 with 26.1 million tourists and €14,041M in economic impact - Observatori del Turisme a Barcelona: ciutat i regió. (2026). Observatori Del Turisme a Barcelona: Ciutat I Regió. https://observatoriturisme.barcelona/en/noticia/destination-barcelona-closes-2025-with-26-1-million-tourists-and-e14041m-in-economic-impact/
Portal Barcelona Dades. (2026). Barcelona.Cat. https://portaldades.ajuntament.barcelona.cat/en/report/housing
New measures to tackle the housing emergency and boost available housing | Consorci Habitatge | Barcelona. (2024). Consorcihabitatge.Barcelona. https://www.consorcihabitatge.barcelona/en/noticies/new-measures-to-tackle-the-housing-emergency-and-boost-available-housing-1414006
Trust for London. (2021). Average London Rent, London Poverty - Trust for London. Trust for London. https://trustforlondon.org.uk/data/rent-affordability/
Non-primary residence surcharge. (2026). Nyc.Gov. https://www.nyc.gov/site/finance/property/non-primary-residence-surcharge.page#
Mayor Mamdani, Governor Hochul Announce State’s First Pied-à-Terre Tax, Requiring Ultrawealthy and Global Elites to Pay Their Fair Share. (2026, April). The Official Website of the City of New York. https://www.nyc.gov/mayors-office/news/2026/04/mayor-mamdani--governor-hochul-announce-state-s-first-pied-a-ter
Goldstein, D. (2023). 2023 New York City Housing and Vacancy Survey: Selected Initial Findings [Housing survey report]. https://www.nyc.gov/assets/hpd/downloads/pdfs/about/2023-nychvs-selected-initial-findings.pdf