The economic impacts of constraining second home investments

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.