The European Court of Justice ruled Tuesday that cities can restrict short-term housing rentals.

Under the Housing Code, change of use of residential premises in municipalities with more than 200,000 inhabitants requires authorization. The practice of renting out one’s apartment repeatedly constitutes a change of use. This is particularly an issue with Airbnb landlords, who consistently rent out their property for short-term rentals.

Two owners of studio apartments in Paris repeatedly and without prior authorization would rent out their studio apartments for short-term rentals. Looking to the French Constitution and the Housing Code, the Regional Court in Paris ordered the owners to pay a fine and change the use of the properties back to residential. The Court of Appeal affirmed.

On Tuesday, the Court of Justice ruled that national legislation allowing renting to be subject to prior authorization was covered under the concept of “authorization scheme,” and not by the concept of “requirement.” An “authorization scheme” required the service provider to take steps and a formal decision by authorities that authorized the activity.

The court found that the authorization scheme was justified because the legislation was intended to combat a long-term rental housing shortage. The legislation was also proportionate because its scope was limited to that specific renting activity.

The court noted that the term “repeated short-term letting of furnished accommodation to a transient clientele which does not take up residence there” was not clearly defined. The court also stated that the conditions for granting authorization must be transparent, accessible, and made public advance, which was satisfied when people who wished to rent their property were in the position to “familiarise themselves fully with the conditions.”