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The economic impacts of constraining home investments

Author

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  • Christian A. L. Hilber
  • Olivier Schöni

Abstract

We investigate how political backlash against wealthy investors in high-amenity places affects local residents. We exploit a quasi-natural experiment: the 'Swiss Second Home Initiative', which banned the construction of new second homes in desirable tourist locations. Consistent with our model, we find that the ban substantially lowered (increased) the price growth of primary (second) homes and increased the unemployment growth rate in the affected areas. Our findings suggest that the negative effect on local economies dominated the positive amenity-preservation effect. Constraining second home investments in locations where primary and second homes are not close substitutes may reinforce wealth inequality.

Suggested Citation

  • Christian A. L. Hilber & Olivier Schöni, 2018. "The economic impacts of constraining home investments," CEP Discussion Papers dp1556, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp1556
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    File URL: https://cep.lse.ac.uk/pubs/download/dp1556.pdf
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    Citations

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    Cited by:

    1. Mrinal SAIKIA & Prakash DAS & Disha NEOG, 2023. "Evolution of growth theory: from Harrod to Romer," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(2(635), S), pages 125-138, Summer.
    2. Klein, Aaron, 2019. "Incorporating Macroprudential Financial Regulation into Monetary Policy," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 1(4), pages 1-22, March.
    3. Smith, Michael, 2022. "Monetizing virtuous employees," Accounting, Organizations and Society, Elsevier, vol. 98(C).

    More about this item

    Keywords

    second homes; wealth inequality; land use regulation; housing policy; house prices; unemployment;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations

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