The Housing Market Impacts of Constraining Second Home Investments

Christian Hilber and Olivier Schöni

SERC Discussion Papers from Centre for Economic Performance, LSE

Abstract: We investigate how political backlash against wealthy second home investors in high-amenity places - tourist areas or superstar cities - affects local residents. We develop a general equilibrium model and exploit a quasi-natural experiment -the 'Swiss Second Home Initiative' (SHI) -to test the key predictions of the model. Consistent with theory, we find that the SHI, which banned the construction of new second homes in desirable tourist locations, lowered transaction prices of primary homes in affected areas by around 12 percent but did not adversely affect prices of second homes. Our findings suggest that the negative effect on local economies dominated positive amenity-preservation effects. We conclude that constraining second home investments may reinforce rather than reduce wealth inequality.

Keywords: second homes; wealth inequality; land use regulation; house prices; homeownership; real estate investments (search for similar items in EconPapers)
JEL-codes: D63 G12 R11 R21 R31 R52 (search for similar items in EconPapers)
Date: 2016-08
New Economics Papers: this item is included in nep-geo and nep-ure
References: View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: The Housing Market Impacts of Constraining Second Home Investments (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:sercdp:0204

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