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According to basic economics, when vacancy rates rise, house prices should decrease and vice versa, responding to supply and demand mechanisms. However, previous studies have observed that, before the economic crisis, this was not the case in Spain and Malta. It has been questioned whether this paradox is a Mediterranean phenomenon or simply the result of isolated cases of malfunctioning housing market. This paper contributes to this discussion by reviewing the pre-crisis housing market of a third case study: Italy. A Mediterranean housing system perspective is used to analyse the paradox, and methodological issues regarding the definition and measurement of vacancy are addressed. Moreover, the paper explores the consequences of the high Italian vacancy rate within a context of housing shortages and affordability problems. We argue that a better understanding of the characteristics and implications of vacancy is necessary in order to be able to implement sustainable housing and planning policies. [ABSTRACT FROM AUTHOR]