The European Commission's proposal is aimed primarily at European cities and regions where housing affordability has become a serious problem, ministry tourism legal adviser Kati Kikas said.

The proposal would not require member states to impose restrictions, instead creating a framework for assessing whether they are needed and proportionate.

"A local government would have to establish that its housing problem is persistent, and it must demonstrate that short-term rentals have negatively affected housing availability or affordability for at least three years before imposing restrictions," Kikas explained.

She stressed that no nationwide problem has thus far been identified in Estonia that would warrant the additional regulation of short-term rentals.

A ministry-commissioned study found that growth in the short-term rental market has slightly reduced housing supply and raised prices, but its impact has remained relatively weak even in areas where the market is most active.

The effects in Estonia have therefore been primarily regional, not nationwide, the adviser noted, but added that the government is still developing its position on the EU initiative.

"We consider both an evidence-based approach and listening to local governments' needs important to understand whether and what additional tools they need to fulfill their duties," Kikas said.

She added that any measures should interfere as little as possible with property rights and the freedom to do business, while also avoiding unnecessary red tape for businesses, local governments or the state.

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