The Economic Impact of Vacation Homes

It’s vacation time and, if you’re lucky, you’re heading off for vacation at your second home or vacation rental at the beach or in the mountains somewhere.   These homes can be lovely vacation spots, but do they bring real economic benefits to their host communities?   Are they economic drivers or yet another sign of the growing wealth gap in America?    Recently, I came across an interesting look at this issue in the New Hampshire Business Review.  “The Economic Impact of Second Homes in New Hampshire” examines whether New Hampshire’s big vacation market brings real benefits to local residents.   Second homes are big business in New Hampshire and across New England.    Seasonal homes account for 10.4% of all homes in New Hampshire, and vacation homes play an even bigger role in Maine (16.4% of all homes) and Vermont (15.6%).   Current research finds that these seasonal homes can have mixed effects for the local economy.   Most second home owners are older and more prosperous, so they do spend money on amenities and do contribute to growth in local sectors like construction and real estate.  But, they also serve to skew local demographics (vacation centers have older populations than other locations), and crowd out housing markets for families and lower income workers who cannot afford the prices paid for typical vacation homes.   As such, many researchers contend that large concentrations of seasonal homes contribute to higher levels of income inequality.  These concerns have led some European regions to place limits on second home ownership.  Here in the USA, communities are still struggling with these challenges, but many places are beginning to take a deeper dive into finding ways to deal with the negative repercussions of large seasonal home concentrations.  (Check out these examples from Sonoma, CA and rural Minnesota).   As services like Airbnb and HomeAway continue to grow, we can expect that this issue will continue to get significant public attention.