FGCU Sales Price Effects of Rent Controls Discussion Responses

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Respond to the two students’ posts. explain your viewpoints

Post 1

Rent controls might seem like they would positively contribute to a affordable housing shortage but it can actually do the opposite. Imposing rent controls will cause the market to restrict the supply of housing. The housing could turn into something else due to decreased revenue, and little funds to spend on maintenance and improvements. There are a few options suggested to replace rent controls.

The Government spends a decent amount of money on providing affordable housing. In 2019, 57 Billion dollars was spent on housing and community development. The benefits of government provided housing includes helping families afford to live and avoid homelessness. 

Another way to make housing more affordable is offering tax deductions to renters. This option would decrease the tax revenue the government is receiving. Although it could benefit the renter by giving them some relief, and lowering the amount they need to pay to live. Ultimately making it easier for them to afford and pay rent. 

Tax breaks to construction companies who provide affordable housing is also an option when considering what would make housing more affordable. Imposing this will allow construction companies to provide their services for cheaper. Thus allowing affordable housing to be built and maintained at a lower cost for owners. This might seem like a good idea but it doesn’t directly help the renter, or owner therefore not having a large enough impact to replace the rent control with it.

All three of these suggestions will in some way positively impact the affordable housing dilemma. Although I would suggest government providing housing in replacement of the rent controls. If the federal/state budget for affordable housing is managed properly then this would be the most efficient, and effect solution to providing and increases the amount of affordable housing available.

Post 2

Rent controls are mostly established by governments in order to deal with shortages of affordable housing. Rent controls are maximum rents that are established by law (McConnell, Flynn, Brue 2021). Tenants’ rents are set at a value that is upheld by law. These values are normally lower and cause there to be a rise in demand for housing within the areas that these rent controls are in. This supply is low, primarily because many renters do not want to rent out their properties for such low amounts that are not leaving them any profits. However, investors might find these types of situations favorable because they invest money into cheap buildings that they will use to acquire higher profitability. 

The first option would require the government to invest in the area in order to be able to set up construction for housing or purchase previously set up housing. This will cost the government to spend more and will most likely cause taxes for citizens to increase because of this loss of funding. Tax deductions to renters will allow rent controls to be removed and rent amounts would go back to the normal amounts set by the landlords of the properties. But, with the tax deductions for renters, they are able to claim certain things such as a home office, and insurance. in order to have this amount deducted from their annual taxes. This benefits the renters, but it will cost the renters to lose a certain amount of income from renting their properties when the rent controls are in effect, and not all claims might be approved. Tax breaks to construction companies that provide affordable housing will benefit them by providing them with tax credits or deductions. This allows them to create more housing to meet demand and allows them to claim deductions on their taxes. However, the cost would be that the companies would not have a high profitable income and would be having a loss due to the amount of financing that has to go into constructing the affordable houses. The best option would be tax reductions for renters since it will allow them to claim certain deductions on their taxes concerning their properties. This will allow them to be taxed less and eventually be able to retain a higher income. 

References

McConnell, C. R., Brue, S. L., & Flynn, S. M. (2021). Microeconomics: Principles, problems, and policies. McGraw-Hill Education. Retrieved from https://prod.reader-ui.prod.mheducation.com/epub/sn_7edf/data-uuid-59541113fe824823bb02af07295f6697.

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