The rapid growth of short-term rental services — which essentially amounts to the provision of accommodation, especially in Tallinn's Old Town — has created a situation where local residents, legitimate accommodation businesses and the state itself are all suffering simultaneously.

Officials from the Ministry of Economic Affairs and Communications (MKM) have been asking the same question at meetings for nearly eight years: "What problem are we solving?" This continues even after a thorough and substantial study, completed in September 2025 at a cost of more than €100,000, clearly identified both the problems and possible solutions. Local residents and market participants had known the answer to that question eight years ago.

In addition, MKM officials tend to draft meeting summaries in a way that does not reflect the actual discussions or the positions of stakeholders. Whose interests are being served by this behavior remains unclear. What is clear, however, is that the state is losing out — an estimated €50 million in tax revenue annually. That money would have a very tangible impact on the quality of public services; for instance, it could be used to raise the salaries of teachers and healthcare workers.

Residents left to their own devices

Residents of Tallinn's Old Town have been drawing attention for years to party noise, waste issues, a decline in safety and sense of home and the transformation of residential buildings into monofunctional "accommodation units" where permanent residents no longer have a place. Who would want to live in a building that, due to the daily turnover of neighbors, has effectively become a hotel?

These are not isolated incidents, but a systemic issue the state has ignored for years. Local communities no longer believe officials' promises about the corrective impact of "soft measures" — the idea that businesses using others' homes as hotels would change their behavior based solely on explanations and polite requests.

The Old Town Society (Vanalinna Selts), which represents the Old Town's residential community, is convinced that since the regulation of home-based accommodation has already been delayed too long, the situation can now only be improved by giving the power to permit such services to the resident communities themselves — that is, to housing associations.

Accommodation market overview the bare minimum, not a restriction

The consensus among market participants was reaffirmed at a roundtable held on January 29, 2026. What is urgently needed is a clear definition of accommodation services and the sharing economy, a nationwide accommodation activity database and a requirement for accommodation providers to register their guests. This is supported by local residents, municipalities, hotels and short-term rental service providers — but the Ministry of Economic Affairs and Communications is not listening. Registration is not a ban or overregulation; it is the bare minimum for the state to know who is operating in the market.

An estimated 20–30 percent of overnight stays are not reflected in official statistics. This results in incomplete tourism data, misguided policy decisions, significant losses in tax revenue, unfair competition for those who follow the rules and a security risk when people are accommodated without being registered.

Those operating in the black market cast a shadow over the entire sector, including short-term rental providers who want fair and transparent rules.

Lithuania's recent experience shows where a lack of oversight in accommodation services leads. In Vilnius, the short-term rental market has grown similarly to Tallinn, but the absence of legal clarity has led to conflicts between residents and businesses, with fines being used as the primary solution. Even there, officials admit that current regulations no longer reflect reality and need to be revised. Estonia still has a chance to act before conflicts escalate and court battles become the only remedy.

Lithuania has concluded that bringing order to the short-term rental market is not a restriction but a tool to ensure fair competition. Clear rules allow the state to collect taxes, reduce unfair competition and create equal conditions for all accommodation service providers. At the same time, registration improves customer safety and helps preserve the quality of life for local residents.

Officials and politicians who oppose increased tax revenue and greater market transparency are not standing up for a healthy business environment, the interests of local communities or the improvement of Estonia's tax base and public safety.

Business activity must not happen at the expense of residents

It is important to clearly distinguish between the sharing economy and commercial accommodation activity. A person renting out their home for a couple of weeks is not comparable to someone managing multiple apartments for profit. A study commissioned by the Ministry of Economic Affairs and Communications makes this distinction clear: approximately 90 percent of short-term rental offerings effectively constitute accommodation services, not home-sharing.

In the current situation, the burdens of accommodation activity — noise, safety concerns, cleaning, wear and tear of shared spaces and so on — are often placed on the shoulders of residents. Meanwhile, there are no uniform obligations or accountability mechanisms in place. This is inconsistent with constitutional rights and the principle of a level playing field in business.

The delay in regulation has been caused by inaction and intentional stalling. For eight years, a handful of officials have obstructed meaningful progress, leading to the disintegration of Old Town communities, the erosion of neighborhood identity and sense of home, inevitable legal disputes, unfair competition against hotels and registered accommodation businesses and the loss of tax revenue for the state budget.

This inevitably raises the question: why does the state seem intent on creating more favorable conditions for some accommodation providers, while others are required to meet strict standards? Is this truly in the public interest? Or do certain MKM officials have other interests at play?

The experience of other European cities clearly shows that if the impact of short-term rentals is not proactively managed, crises will emerge — ones that are far more expensive and painful to resolve later. Estonia does not have to repeat these same mistakes.

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