Association for Public Policy Analysis & Management

Overnight visitors to resort communities exhibit an increasing propensity to choose alternatives to traditional lodging and often desire to stay in a vacation home rental (VHR) located in a residential neighborhood. Before the now prevalent “sharing economy,” the effort involved in advertising and managing a VHR meant a significant additional cost to the homeowner of retaining a management company. The rise of home sharing platforms like Home Away and Airbnb have significantly lowered the costs born by an owner of a VHR for marketing, scheduling, and fee collection. This, combined with the increasing preference of visitors for VHRs, has dramatically increased their presence in resort communities throughout the United States and world. Planners are interested in knowing whether they should embrace or discourage this change. Based upon a hedonic regression analysis of home sales in the City of South Lake Tahoe, California between 2011 and 2016, a vacation home rental (VHR) with average occupancy sells for 8.5% more than a similar non-VHR. The overall net effect on value of home sales from the presence of neighboring VHRs is negative, but positive for owners of VHRs. A planning prescription from this finding is the desirability of levying of an additional tax on the rental income earned by the owner of a VHR that if appropriately used, could mitigate the negative price effect found for non-VHR homeowners.