Effects of Government Policies on Affordable Housing


Government policies are actions and decisions made by government officials and organizations to address specific issues or problems. These policies can take many forms and be implemented at different levels of government, including local, and national.

A good public policy will be able to define a problem, gather evidence, identify causes, review any existing policies, and strategize solutions that anticipate social reactions.

Government policies can have a significant impact on the availability and affordability of housing in the real estate market. Policies that encourage the construction of new affordable housing and assist low-income families can help to increase the availability of affordable housing, while policies that restrict housing construction or increase the cost of construction can make affordable housing less available.

There are several policies that can affect affordable housing in the real estate market. They include:

Zoning laws

Zoning laws are the rules and regulations that govern the division of land into “zones” by the government or a municipality. A zoning law, also known as a zoning ordinance, specifies acceptable methods of land use for real estate within zoning districts.

Zoning laws, in essence, determine which types of properties can coexist in different areas of the city.

The laws are enacted by local government branches, municipal corporations, or counties. When an area is designated as a zoning district, specific rules govern how a property owner can use the land within that zone.

Local governments can use zoning laws to restrict the construction of new housing in certain areas, which can drive up housing prices.

Tax incentives

A tax incentive is a government policy that encourages individuals and businesses to spend or save money by lowering the amount of tax they must pay.

Taxes have a direct impact on housing affordability in the real estate market by increasing the cost of some cost components while decreasing the cost of others.

Taxation influences housing affordability indirectly by stimulating or discouraging housing investment.

Direct taxation of housing-related income (taxation of both corporate profits and personal income); indirect taxation of housing-related goods and services consumed by both firms and households; and taxation of wealth held in the form of real estate, including property taxes, transfer fees, and capital gains tax.

Governments can offer tax incentives to developers who build affordable housing, which can encourage the construction of more affordable units.

Public housing programs

Public housing programs are designed to provide affordable rental housing for low-income families, the elderly, and people with disabilities.

Governments can fund public housing programs, in which several real estate companies can invest in exchange for low-income families having access to affordable housing.

Rent control

Rent control refers to legislation that restricts rental rates in a city or state. Rent control laws vary by municipality, but in general, they set a limit on the maximum rent that can be charged for a unit, as well as the amount that the rent can be raised each year. Cities use rent control laws to regulate the housing market.

The goal of these price controls is to keep rental housing affordable for low- and moderate-income tenants.

Some governments implement rent control policies, which limit the amount landlords can charge for rent. This can help to keep housing costs low for renters, but it can also discourage landlords from investing in their properties, resulting in a shortage of rental housing.

Building codes

Building codes are a set of rules that specifies the standards for constructed objects such as buildings and non-building structures.

Building codes can increase the cost of construction, which can make it more difficult for developers to build affordable housing. This has a significant impact on the real estate market as they are unable to develop affordable housing.

The government should ensure that the policies implemented in the real estate market do not affect affordable housing rates in the country.

Reference

Sarah Sharkey, 2022.

Jenny Schuetz, 2020.