Demand and supply problem!!! Help!!!?

Question

Suppose a government wishes to ensure that its citizens can afford adequate housing. Consider three ways of pursuing that goal.
One method is to pass a law requiring that all rents be cut by one-fourth.
Second method offers a subsidy to all builders of homes.
Third method provides a subsidy directly to renters equal to one-fourth of the rent they pay.
>>Predict what effect each of these proposals would have on the price and quantity of rental housing in the short run and the long run.
>>And I want to know that what is the short run and the long run refers to? the renter or the builder?

Answer 1

If the rents had to be cut by one-fourth there is the chance some owners would sell the home because a reduced rent may not cover the mortgage payment. In the case of the owner with more than one rental property there is the chance that owner may want to sell one or more pieces of property in order to eliminate any mortgage payments there were on them. It is also possible that the houses would not sell as easily as rental properties because potential buyers who could afford to rent at the lower rent and have the right mortgage terms would be reduced as well. I suppose it is possible that wealthier investors could eventually buy the homes that go up for sale, but the wealthiest investors often don't "dabble" in little rental properties. There is also the chance that reducing rents by one-fourth would still not make the housing affordable for enough people. It may actually act as nothing more than a break for people who can manage to pay the higher rent that already is in place. I think in the long term there would be the chance that increased housing prices would mean the one-fourth was a larger number, which may not encourage rentals. If the prices of houses remained stagnant for any length of time it could result in more home purchases by people who could afford them. There is the chance that these people may offer the homes for rent, so in the long term there is the chance that the rental market would level itself off. There is, however, the question of whether the government's involvement in the homeowner's finances should be considered a violation of the right to not have too much government involvement in the lives of people. Another issue could be that the next generation of homeowners may keep the houses for themselves, in view of the fact that they bought as the result of lower home prices; and that would keep the number of available rentals down.

A subsidy to all builders of homes: What would this do? Give builders an incentive to build more homes? What then? Builders have to pay for building supplies, land, etc. If they got a subsidy from the government it would obviously defray costs and could make it possible for them to build more homes, but unless the homes can then be sold at very low prices a subsidy to builders, alone, would do nothing but produce more housing. I don't see how it would make that housing affordable, although I do see how if the subsidy required cheap homes that may help. Still, however, there is the issue of paying for land and then putting cheap homes on that land. This would mean that the land, itself, may not be put to its best use; because higher-priced homes mean higher taxes. I suppose the right subsidy (designed to consider all drawbacks) could work. It does seem to me, though, that approaching the affordable housing problem through the builder is not necessarily the best approach. Of course, any subsidy comes from tax dollars; and if the subsidy came from the state it would have the potential of backfiring by way of higher taxes, particularly if those taxes were property taxes.

A subsidy to renters equal to one-fourth the rent the pay: This may make good sense, but the problem of affordable rents isn't always a matter of being able to pay, say, $1200 a month versus being able to pay $900 a month. This $300 subsidy may be of some small help, but in the scheme of living expenses and pays for people who have difficulty affording existing rents this may not be nearly enough to move many families from not being able to afford a place to live and being able to. While this may make good sense in some situations, there are times when a "pittance" doesn't do much good for many people. A large sum of money which would be enough to do something substantial can have its usefulness diminished exponentially by being chopped up into several tiny amounts. In other words, a half million dollars to build some basic condo's and house a handful of people may actually be more useful than dividing up that amount and giving a pittance to a large number of people. I don't necessarily see this subsidy approach as doing much in terms of short- and long-run consequences. I think this money would, for the most part, be absorbed into the renter/owner agreement while possibly making housing affordable for a small number of people at just the right, narrow, income level.

When it comes to the subsidizing the builder approach, it would, of course, matter whether inexpensive houses were built or whether apartment complexes were built. If apartment complexes were built it would probably provide increased available rentals

It seems to me that requiring reduced rents is unfair to the property owner, and that offering a subsidy to renters would be nothing much more than an extension of the existing Section 8 housing thing (which has, as far as I've heard, long waiting lists) and wouldn't do much for either owners (who are now getting their rents anyway) or potential renters (who would need more than that subsidy to have it be adequate).


Its four o'clock in the morning. I can't mull this issue over any longer. :)

Answer 2

I agree that the "demand" side is just as much at fault for part of the broken system. But, reality check, many people don't look at it as them wanting the perfect child, but simply wanting a child that is a reflection of themselves as a birth child would. They don't see themselves as being selfish or unreasonable. And I for one don't believe they are being selfish and unreasonable. They are looking for the birth child they cannot have. And facts are facts. More caucasions adopt than any other race. Less caucasions give up children for adoption than minority races. If you look at families who have mixed race adopted children and who are adopting older children, a lot of those folks are adopting to help a needy child. They aren't pining and grieving for that child they can never have. There are a lot less of those people out there. Hence, the demand for white healthy babies. I also don't believe that most of these couples looking for a white healthy baby would even consider adopting a baby that was coerced away from it's mother if they knew. They just want the experience of loving a child from birth on. I don't blame them in the least. The only people to blame are those who do the coercing. It should be illegal and carry very stiff penalties when proven to be true. Regardless, of the demand for white healthy babies, no one should feel the need to supply it. Not a mother making a difficult decision. Not a social worker trying to match childless couples. And certainly not an agency or attorney who will make a profit from providing it. So, in my opinion, that is where reform should begin. Take the money out of the adoption and many other pieces of that puzzle will simply fall into place within a few years. Close down all agencies and attorney's that do adoptions and make then all go through the government process with no birth moms getting money and no adoptive parents paying money. Things would change very quickly in the industry.

Answer 3

The first would have the effect of eliminating the rental housing market and a lot of people would be forced to live on the street.

The second and third methods are just income redistribution plans making the rich pay for the housing for the poor.