Restricting Ownership of Vacation Homes

Abstract

One way to enjoy or consume the countryside is through a week's vacation in a cottage or vacation home. The consumer may be the owner of the vacation home or may rent it. This paper focuses on the effects of restricting private ownership of vacation homes with limited supply. It is not surprising that under realistic assumptions a free market will lead to the trading of vacation homes, whereby they will eventually be owned by high-income consumers. In the model presented it is further shown that such trading will increase the demand for weeks in vacation homes, raise the price on the rental market and reduce the number of consumers with this kind of access to the countryside. Thus unrestricted trade may be welfare-reducing and some kind of ownership restriction may have positive welfare effects. However, other ways to secure public access to the countryside might well be preferable to ownership restrictions.