Investing in Tourist Rentals in Florence

Making the decision to invest in real estate is a significant step, beginning with choosing the right location for purchase. When it comes to long-term profitable investments, Italy stands unrivaled on a global scale.

With its temperate climate, artistic heritage, and rich culinary traditions, the “Bel Paese” of Italy  has always been a top travel destination for those who love to explore the world. Nowadays, investing in real estate in a country with a strong tourist vocation inevitably means considering short-term rentals. Initially viewed as a revolution, they have undergone a significant shift in perception following the economic and social changes brought by COVID-19.

Over the past two years, short-term rentals have been at the center of various regulatory changes – primarily aimed at combating tax evasion – which differ depending on the city in question. While they are objectively convenient and ensure guaranteed payments, they must be approached with caution, beyond just complying with current regulations.

For example, examining homes for sale in Florence Italy – one of the country’s main artistic cities, home to prestigious universities, and close to prominent industrial districts in various sectors – reveals that in 2023, the average rental yield for long-term leases was 6.7%, the second-highest in Italy.

Comparing these figures with short-term rental returns, there is an additional 1.3%, a difference worth considering.

These numbers suggest that the market must be approached differently even compared to just a year ago, requiring a shift in rental strategies to attract a different target audience beyond fleeting tourists.

It is no coincidence that we highlighted Florence’s academic excellence—as well as that of nearby cities, which are easily accessible—and its strong business sectors, from leather production to the jewelry industry.

These are areas worth observing as they generate a pool of potential medium- and long-term tenants that is highly attractive.

Future Regulatory Changes

As previously mentioned, discussions about short-term rentals in Italy cannot ignore the significant regulatory changes of the past two years—rightly described as a veritable tsunami for the sector. The case of Florence warrants special attention, as the city has historically adopted a restrictive stance toward short-term rentals.

On March 12, the city government at Palazzo Vecchio officially approved a resolution banning new short-term tourist rentals in Florence’s historic center, a UNESCO World Heritage Site. This was the second legally required step following the initial approval granted in the summer of the previous year. The final decision now rests with the City Council’s definitive vote.  Will the sun set on Florence for such rentals?

Although the timeline for completing this legislative process remains unclear, a transitional safeguard measure has already been introduced, effectively halting new short-term rentals in the city’s historic center.

While a heated debate continues between the Regional and Municipal authorities over whether to address short-term rentals from an urban planning perspective, investors face an undeniably challenging scenario. However, with the right approach, these challenges can be transformed into opportunities that add human and cultural value to an urban landscape that, since ancient times, has elevated Italy’s name through genius and creativity.