Second home ownership is often discussed in housing policy debates, but in general there is a poor understanding of what is considered a second home and where these homes are located. This is particularly true in tax policy contexts because the most common stereotype of a “second” home – an expensive beach house – is often a rental property that is not eligible for the mortgage interest deduction.
The following analysis sheds some light on the location and count of second homes that are in fact eligible for the second home portion of the mortgage interest deduction. The findings indicate that the geography of second home ownership is much more expansive than simply beachfront locations.
Accurately accounting for the stock of second homes is difficult, in part because what constitutes a second home differs depending on what definition is used. For the purposes of the mortgage interest deduction (MID), a second home is, in general, a non-rental residence that is not the taxpayer’s primary residence. This could be: (1) a home that used to be a primary residence due to a move or a period of simultaneous ownership of two homes due to a move; (2) a home under construction for which the eventual homeowner acts as the builder and obtains a construction loan (Treasury regulations permit up to 24 months of interest deductibility for such construction loans); or (3) a non-rental seasonal or vacation residence.
Given this tax-based definition and using data from the 2009 American Community Survey (the most recent available), a mapping of the share of each county’s housing stock that consists of second homes is generated. However, the analysis excludes the stock of homes under construction (#2 above) because county level data are not available.
Overall, there are 6.9 million housing units that qualify as second homes or more than 5% of all housing units in the nation.
907 counties in the U.S., or about 28% of the total, had at least 10% of the local housing stock consist of second homes, with at least one such county in 49 states (Connecticut and DC are outliers).
339 counties, or more than 10% of the total, had at least 20% of the local housing stock due to second homes.
And there are 26 counties where at least half of the local housing stock was made up of second homes. Of these counties, six were in Michigan, five in Colorado, and two each in Pennsylvania, Utah, Massachusetts, and California. One such county was located in New York, Alaska, Idaho, Missouri, Wisconsin, Texas and New Jersey.
Of course, large overall county stocks of second homes are located in areas with larger totals of population and housing, meaning large metropolitan areas. Keeping this in mind, on a pure count basis, the following states possessed at least one county with at least 25,000 second homes: Florida, California, New Jersey, New York, Texas, Delaware, Michigan, South Carolina, Nevada, Massachusetts, Illinois, and Arizona.
These findings suggest caution regarding proposals that would affect second home ownership because the reasons for owning a second home are more diverse than critics usually provide. And as the maps above indicate, and given the economic benefits of housing, there are many locations in the country where second homes constitute a significant portion of the total housing stock.