This report is from the University of Aruba for the Government of Aruba about the effect of the growing Rental Business and Real Estate Market in Aruba.
Report by Martijn Mak, Sjoerd Boerdijk and Koert van Buiren
From international academic literature, positive, negative, and mixed socioeconomic effects from vacation home rentals (VHRs) can be derived. Some of these effects result from an increased in tourism in general, while other effects result from the specific characteristics of VHRs compared to traditional tourist accommodation.
The extent to which positive and negative effects occur depends on several circumstances in the economy. The table below presents how characteristics of the Aruban economy and VHR sector affect the degree to which the socioeconomic effects of VHRs occur in Aruba. It turns out that VHRs generate significant economic activity and opportunities, but there are strong indications that the adverse socioeconomic effects of VHRs occur in an enhanced degree in Aruba. The housing market in particular is affected adversely by the VHR supply. Moreover, the sector is commercialized and suppliers are usually not small homeowners renting out excess space in less developed neighbourhoods, but rather professional service providers owning and exploiting multiple homes.
Internationally, multiple cities and regions have adopted policies to regulate the VHR market. Regulatory policy is highly diverse in its approach and depends on the policy goals that jurisdictions have with regards to the VHR market. Literature identifies three main policy goals: easing the pressure of tourism by limiting the number of VHRs; protecting affordable housing by limiting the commercialization of the sector; and preserving residential living by reducing nuisance from guests. Figure 1 provides an overview of the policy instruments used internationally to achieve the policy goals and the positive and negative effects of using these instru- ments.
In Aruba, negative effects that stem from the growth of the VHR sector are mostly related to surging housing prices and commercialization of the sector. Policy instruments aimed at mitigating these negative effects include regulating the number of VHRs, restricting the number of days/nights, regulating accommodation type, requiring rented rooms to be in owner-occupied houses and prohibiting non-residents from purchasing residential homes. These policies mostly affect commercial investors in the VHR market while facilitating residential homeowners to earn additional income. Since the VHR sector in Aruba is commercialized, policy instruments that affect commercial investors could have a significant impact on the VHR sector and should therefore be designed carefully.
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