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Economics
1. How would you characterize the opportunity cost of interest rate deduction (subsidy) for house owners? (Hint: Think about this; What if the government ended interest rate deduction (subsidy) for house owners and used that additional tax money to build public goods like roads, parks, educational institutions, hospitals etc.? How would that affect the demand for housing, demand for apartments, national productivity, income distribution, etc.?) The interest rate deduction offered by the government is an incentive that is usually placed so as to encourage the ownership of homes. It is especially for this reason that the demand for housing towards the new millennium was so
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In this case, the demand for home ownership would reduce and there would be a higher demand for rental ownership. The part-time ownership industry would be on the rise because shelter being a basic need would still require satisfaction. With the urge to own a home dying down due to lack of incentive through the subsidy, the need to shelter would be satisfied through rental schemes and leases. The nature of the opportunity cost would still be related to public service provision and it would allow for better and more efficient provision of services to the populace. The availability of a second option means that non-provision of permanent homes for the public would not adversely affect an individual’s access to shelter.
Analyzing this on a national scale means that it becomes pertinent to assess impact on demand, national productivity and income distribution. The loss of the subsidy means that there would be fewer home owners and a downturn in the real estate industry. This downturn would however be offset by an increase in demand for apartments. Since investments into home markets would marginally reduce, new investments in apartment buildings would provide better returns to the capital owners. In terms of national productivity, the contribution of banks would not be affected since alternative revenue streams would be provided in the apartments sector. The government however, would
2) What are the advantages and disadvantages of investing in property? Despite economic downturn in recent periods, there are various incentives provided by
The Public Policy Institute states that Section 8 project-based rental assistance contracts involving HUD and for-profit owners contracting private multifamily housing, which is made available by HUD to low-income households who qualify for housing assistance. The subsidy is such that pays the difference "between 30 percent of the household's income and the contract rent; the subsidy is paid by HUD to the landlord." (AARP Public Policy Institute, 2002) In addition, HUD has Dispersal programs for renters of Section 8 housing due to the desire of the public to avoid to concentration of poverty-level residents in urban areas. This is because there is a general consensus that Section 8 subsidized housing tends to drive down the market prices of property in the same area. There are various challenges that are faced by the Section 8 subsidized housing program as it assists low-income households obtain appropriate housing through the provision of rental assistance.
To evaluate the effect that right to buy scheme would have on the housing market
Real estate finance in the modern community is changing the perspective of modern lending and purchases. It is a means to contemporary community’s ability to develop a foundation for discussing the nature and means of public spending and purchase. As a self-government sponsored agency, Federal National Mortgage Association (FNMA) also known as Fannie Mae works with the ultimate responsibility of lending and buying secondary mortgages in the market (Oesterle, 2010). It helps in the conservation of interest rates in the real estate business in the contemporary community. There is also the need for focusing on the impacts of the Fannie Mae on real estate finance. The approach of the Fannie Mae helps lenders to use the money gained from the secondary
The aim rationale behind reduced interest rate was to provoke recovery from the crisis. This targeted increase in consumers as well as firms and government spending since incentive to save had been eroded. This measure not only increased aggregate demand, it also aid commitment to new investments. Additionally, monthly cost of mortgage repayment was witnessed which in turn, provided more disposable income and make investment in property market more lucrative.
The utilization of the Low-Income Housing Tax Credit or LIHTC has had an overall positive effect on housing for low-income families in the United States. Four key outcomes of the LIHTC are: First, there is less likelihood of segregation within the tax-credit housing than in the government provided section 8 and government-subsidized voucher programs (Schwartz, p. 115). Second, the purpose of the program, which was to subsidize mixed income housing to low and working class families, is provisionally being met (Khadduri, Buron, & Lam, p. 10). Third, through decentralization of the implementation of the LIHTC program the federal government allowed the state governments more latitude in the dissemination of the tax credits to appropriate developers (Furman Center, p. 2). Finally, there is a correlation between the areas where LIHTC housing properties are developed in the impact on the sounding region. This correlation is both positive and negative in nature, but heavily is judged on the region that the LIHTC is built in and as to whether it is in an urban center, suburb, or in the metro areas (Deng, pp. 46-48). These four outcomes will guide the body of this paper about the overarching theme of LIHTC as a policy tool as opposed to section 8 housing or government provided housing.
Thesis: Home ownership provides greater potential gains than renting, while renting provides superior financial flexibility.
This policy brief is prepared to give some insights of the housing affordability problem in Australia. In addition, the paper also suggests some approaches in which the Government should consider in tackling the issue in the Australian context. Housing affordability always
A housing policy can be thought of as the efforts put in by a given government to transform a housing market(s) for the purposes of achieving social objectives. In most cases, a housing policy is meant to ensure that the general population has access to a home that is affordable. For instance, the British Conservative/Liberal Democratic coalition’s housing policy is aimed at increasing the number of affordable housing units; fostering homeownership; making social housing flexible; tackling homelessness (especially for the
Macroeconomics is an excellent tool for the analysis of the housing industry as something like a capital good, as a home is considered to be, cannot easily be studied in a short-term platform. Real estate is a good that costs several times more than an average persons annual income, in the United States that number is typically 7 times as much, and in the United Kingdom that number is 14 times as much. Several factors of both supply and demand directly impact the housing market on a macroeconomic scale. (Business Economics, 1)
Housing demand includes household growth, real incomes, real wealth, tax concessions to both owner-occupied and rental housing, concessions to first homebuyers, returns on alternative investments, cost and availability of finance for housing and the institutional structure affecting housing finance provision (Yates, 2008). The growth in the number of households and in real income results in the increased pressure on housing demand.
The increasing homeownership rate in the United States is a worthwhile policy goal. The housing economy creates jobs for American citizens as well as brings down the competitive qualities to purchasing a home allowing more middleclass citizens to spend money on houses. In doing so this drives the overall economy up in the United States.
The research question of this Economics Extended Essay is, “To what extent does the Singapore Government’s policies on housing and immigration, help to increase the demand of the private property sector in the housing market.” For this investigation I used a variety of gathered raw data and policies from the Singapore government websites, on top of that I kept a collection of newspaper progressively monitoring the local property market. The
The new construction market in the mid 2000’s was flourishing. People saw building a home as an opportunity for a solid investment because prices and rates were so low that certain homes could depreciate extremely slowly. However, there would be a negative effect from all this low-cost new construction and few were aware of just how devastating it would be to the new construction market.
Government policies and subsides have a sizable impact on property price, and demand. The government can temporarily boost demand with tax credits, deduction and subsidies. From the customers point of view