The Canary Islands do not require new vacation rentals

The Canary Islands, known for their sunny beaches and volcanic landscapes, have long attracted sun-seeking Europeans. However, beneath this attractive surface, a housing shortage is looming, with local government curbing the holiday rental increases that fuel it. The new regulations, approved after heated parliamentary debates, impose a five-year freeze on new holiday rentals, causing some confusion in southern Gran Canaria’s property market. For investors counting on profitable Airbnb investments, it’s a wake-up call to regulatory realities.

Effective this week, the law reclassifies vacation rentals as a legitimate business, not an informal side investment. Platforms like Airbnb and Booking.com are now facing scrutiny with new license delays. Only previously registered properties are exempt, leading to a rush for existing permits.

A key element of the change is a five-year ban on new vacation rental (VV) licenses. Getting off-the-plan condos in areas like Maspalomas or Playa del Ingles for short-term rentals is no longer possible. “This is a blow to expansion strategies,” observes Elena Vargas of Canary Investment Group. “Investment funds are now being ignored, seeing their pipelines dry up.”

The impact on property values ​​is significant. Existing licensed apartments, now scarce assets, are likely to see higher values ​​due to higher demand. However, unlicensed or newly built units, which lack tourism potential, may be less appealing. Landlords may be forced to consider long-term residential leases or discounted sales. In southern Gran Canaria, where vacation rentals make up a large percentage of some neighborhoods, non-conforming properties may face a markup of 15-20%, according to preliminary market assessments.

The uncertainty extends beyond new buildings. Reduced potential restrictions on license transfers, potentially preventing transfer of VV licenses upon sale or inheritance. If implemented, this can seriously reduce resale values, turning investments into liabilities. “Investors rely on an exit strategy,” Vargas points out. “Without transferability, assets lose value when you want to sell them.”

Adding to the complexity, municipalities have been empowered, allowing them to regulate the density and location of rentals. The councils of southern Gran Canaria must develop custom plans, taking into account local factors such as beach front regulations and density limits. “This creates a risk of fragmentation,” warns the Canary Islands Real Estate Association report. “One city may allow limited growth, while another restricts it completely. It becomes difficult to predict returns.”

The regulations also address scale, limiting tourist housing to 10% of the total residential area of ​​each municipality (20% on smaller islands). This limit is already being pushed in Tenerife and southern Gran Canaria. “In popular areas, it’s a big obstacle,” argued lawmaker Maria López, who criticized the law as “Hütler’s revenge.” A 10-year ban on renting new buildings or commercial space further restricts supply.

This happens when the islands experience a tourism boom. From January to August 2025, more than 10.3 million international visitors arrived, setting records and contributing €15 billion to the economy. However, the increase – estimated at more than 14 million for the year – has raised local concerns about excessive rent and a lack of affordable housing. At the beginning of last year, protests were organized in Tenerife against “tourism saturation”. Underneath the signs proclaiming “Airbnb: evicting the canaries” change is underway.

Government officials portray the measures as protection for the islands. As local president Angel Victor Torres said after the vote, “We aim to return homes to residents, not just platforms.” The new law requires all rentals to be registered by mid-2026, with fines of up to €300,000 for non-compliance, and favors long-term leases in areas already overcrowded with tourists. This reflects a Europe-wide move – mainland Spain has already required 60% neighborhood approval for new tourist rentals since April.

However, private equity firms, and small business owners, see this as “unfriendly” territory. Long-term strategies? Local regulations are subject to change. Property values? Subject to policy changes. “This bill could immediately eliminate almost all informal vacation rentals.” One forum comment from Tenerife, read, reflects concerns about a shift towards hotels – or moving to less regulated areas, such as Portugal.

As sun-seeking tourists make winter bookings, the Canaries’ rental market faces uncertainty. Can the refrigerator calm the market without damaging its attractiveness? Or will paradise become impossible for many? One thing seems certain: in the dynamic southern resorts of Gran Canaria, the age of unlimited Airbnb growth is coming to an end.