Policies Affecting The Home Building Industry essay

The supply of houses, apartments, and other types of dwelling units is directly affected by governmental policies. When a state government, for instance, passes a law which imposes certain restrictions on the construction industry, its action could result to a limited supply of houses and would consequently drive the prices up. If, on the other hand, the law passed by the state legislature happened to provide incentives of any kind to the industry players, it could make housing affordable to the majority of Americans, giving way to the emergence of mass housing developments.

The rise and fall in housing supply corresponds to a rise and fall to the available employment in the housing industry. In the state of New York, a study conducted by Professors Edward L. Glaeser and Joseph Gyourko found that the prices of Manhattan apartments remained relatively stable during the thirty-year period from 1950 up to 1980. However, after 1980, “regulatory constraints” caused a slow-down in the construction of new apartments. The constraint was in the form of a “zoning tax” which consequently constituted more than 50% of the prices of apartments in the state of New York.

Simply put, because of the zoning tax, out of the average prevailing price of the “mean and median condominium” of more than $400 per square foot, more than $200 per square foot went to the coffers of the state government. In the case of “cooperative units,” the zoning tax became $110 per square foot, or more than 50% of the prevailing price of $200 per square foot. Although observers believed that the zoning tax resulted to some positive externalities like the prevention of traffic congestion, they maintained that the resulting price increase exceeded the social benefits.

They claimed that instead of a zoning tax of more than 50%, a tax below the 20% level could have been more practical (Glaeser and Gyourko, 2003). House Committee on Financial Services. (2007). House of Representatives Passes Affordable Housing Trust Fund Act. http://www. house. gov/apps/list/press/financialsvcs_dem/press1010072. shtml H. R. 2895, also known as the National Affordable Housing Trust Fund, is a classic example of a monetary police which directly results to an increase in available houses and a corresponding increase in employment in the housing industry.

Passed by the U. S. House of Representatives on October 10, 2007, it represents the “largest expansion in federal housing programs in decades. ” Its main objective is to bring about the construction, renovation, and preservation of about one and a half million affordable dwelling units for the next ten years. In order to achieve this goal, the program will be provided with an initial funding of not less than $800 million which will go directly to the concerned state governments and local communities (House Committee on Financial Services, 2007).

The Chairwoman of the Financial Services Subcommittee on Housing and Community Opportunity of the House of Representatives, Representative Maxine Waters said that the National Affordable Housing Trust Fund tackles the crisis of affordable housing in all levels of society. According to her, the present cost of housing is increasing at a much more rapid rate than the wages of many households that being regularly employed no longer guarantees that the average American could buy his or her own house (U.

S. House Committee on Financial Services, 2007). She further said that the last time that the federal government created a major program aimed at addressing the problem of affordable housing was seventeen years ago. This time, she explained that “this legislation will tackle the full range of housing crises, providing relief to overburdened renters and homeowners while targeting funds where the need is greatest,” giving hope to millions of Americans to finally have their own homes (U.S. House Committee on Financial Services, 2007).


Glaeser, E. L. & Gyourko, J. (2003). Why is Manhattan So Expensive? Civic Report. Retrieved March 13, 2008 from http://www. manhattan-institute. org/html/cr_39. htm U. S. House Committee on Financial Services. (2007). House of Representatives Passes Affordable Housing Trust Fund Act. Retrieved March 13, 2003 from http://www. house. gov/apps/list/press/financialsvcs_dem/press1010072. shtml