The Impact of Second Homes on Local Taxes*

A methodology to estimate the influence of second homes on municipal taxes is developed in this paper. Assuming that a larger floating population implies an increase in public expenditure, our aim is to develop a model of the relationship between the local taxes paid and the number of second dwellings in a village. As an applied example, the results for two of the most touristy regions of the Mediterranean – the Costa del Sol and the Costa Blanca, in Spain – are shown in this paper. As we will see, there are only three different levels of local taxes, regardless of the number of second homes. The main factors behind high local tax burdens are seaside location and the presence of foreign owners.