Econ multiple-choice questions
Watch a video the Frontline documentary, the “Low Income Housing Tax Credit Program” and some material I provide, then answer 11 multiple-choice questions. It has 2 attempts and I did the first time. I could provide the wrong answer which I chose to let you know. This assignment is due by 5 hours.
QUESTION 2
1. According to the Frontline documentary, the “Low Income Housing Tax Credit Program” provides:
many accounting audits of the program to ensure that the money all goes to build more affordable housing units
more and more affordable housing units annually under this federal program.
a greater proportion of affordable apartments in mostly higher income areas, like the Northern Dallas suburb of McKinney.
substantial financial benefits for the real estate investors that supply and build new, affordable units
4 points
QUESTION 3
1. California’s newly implemented statewide rent control legislation:
Does not allow rents to increase for the next five years.
Allows rent to increase by 5 percent annually plus the rate of inflation.
is the most difficult type of housing policy for politicians to support
will result in a surplus of affordable housing over time
3 points
QUESTION 4
1. The “Standard Model” of rent control is characterized by:
an absolute rent ceil price which is fixed below the rental price that would allow landlords to make a fair rate of return on their investment in rental housing.
an overall loss in consumer surplus.
an increase in producer’s surplus
a substantial increase in the number affordable rental housing units.
3 points
QUESTION 5
1. While there could be an overall loss in social welfare (socially efficiency) caused by rent control, a local public official could be in favor of rent control because:
rent control provides local tenants with predictable,stable rents and this policy does not require an unpopular tax increase or a budget cut in a competing local government program.
of the growing popular support for nation-wide rent control legislation.
Landlords are already wealthy and will not mind new restrictions on rent increases
rent control results in an overall increase in amount ofaffordable housing available to the lowest income families in a local jurisdiction.
3 points
3 points
QUESTION 7
1. Creating moves to high opportunity areas (CMTO) is:
a more targeted form of Section 8 federal housing vouchers
is designed to work just like the Affordable Housing Tax Credit Program
an extreme form of absolute rent control
failing the 2.2 million who will never get out of low opportunity neighborhoods
3 points
QUESTION 8
1. The Low-Income Housing Tax Credit (LIHTC)Program:
has steadily increased the number of low-income units built in every year which is why its program funding has increased.
has significantly reduced housing segregation along the fault-lines of race and income.
has produced fewer units than it did 20 years ago, even though it’s costing taxpayers 66 percent more in tax credits.
has been praised for government oversight that has steadily cut the cost of providing more low-income housing to the poorest families.
3 points
QUESTION 9
1. One substantial problem with the Low Income Housing TaxCredit (LIHTC) Program is that
they will not take Section 8 tenants
there are too many accounting audits that make these developments unprofitable
the housing units are not being built in high opportunity areas
None of the units built provide housing in low-income, low opportunity areas where they are needed.
3 points
QUESTION 10
1. With the passage of the State of California budget for 2019-2020, the legislature included a provision for the State to sue cities with high levels of housing segregation. This measure would have the following effect:
provide more mixed-use zoning for higher density affordable apartments in highly income-segregated cities.
restrict the use of local zoning to stop the building of more Multi-Family Dwelling units that use the Affordable Housing Tax Credit Program.
Ban zoning for Single Family Dwelling in the entire state.
relax regulations to promote the building of more Single Family Dwelling Units in California.
3 points
QUESTION 11
1.
In graph above,if rent control is set at $1000 per month then consumer surplus:
will remain the same because the quantity supplied of rental units will not change under rent control as shown in the graph
will remain the same because area E is a loss in producer surplus that cancelsoutthe gain in consumer surplus
will increase by area E minus area Bwhich will net an overall increase in consumer surplus.
will increase by area B +area C +area E
4 points
QUESTION 12
1. In the graph above showing the imposition of rent control
there will be a shortage of 200,000apartments.
there will be no change in the quantity of apartments supplied,but the rents will be less.
there will be a surplus of100,000apartments.
there will be a shortage of 100,000apartments.
4 points
QUESTION 13
1. The Housing Choice Voucher Program (Section 8)has what direct impact on the market for affordable, privately-owned apartments in a local municipality?
The landlord receives a monthly rent that is below the market-clearing equilibrium in the citys housing market for a Section 8 unit.
It allows choice and increases the demand curve in terms of supply and demand.
It lowers the rate of return to investment in apartments projects that received LIHTC tax credits.
It has a direct impact on the supply curve of low-income apartment units.
3 points
4 points
First Submission which wrong answer I chose
Question 2
According to the Frontline documentary, the “Low Income Housing Tax Credit Program” provides:
Selected Answer:
more and more affordable housing units annually under this federal program.
Question 3
California’s newly implemented statewide rent control legislation:
Selected Answer:
will result in a surplus of affordable housing over time
Question 4
The “Standard Model” of rent control is characterized by:
Selected Answer:
an increase in producer’s surplus
Question 5
While there could be an overall loss in social welfare (socially efficiency) caused by rent control, a local public official could be in favor of rent control because:
Selected Answer:
rent control results in an overall increase in amount ofaffordable housing available to the lowest income families in a local jurisdiction.
Question 7
Creating moves to high opportunity areas (CMTO) is:
Selected Answer:
failing the 2.2 million who will never get out of low opportunity neighborhoods
Question 8
The Low-Income Housing Tax Credit (LIHTC)Program:
Selected Answer:
has been praised for government oversight that has steadily cut the cost of providing more low-income housing to the poorest families.
Question 9
One substantial problem with the Low Income Housing TaxCredit (LIHTC) Program is that
Selected Answer:
None of the units built provide housing in low-income, low opportunity areas where they are needed.
Question 10
With the passage of the State of California budget for 2019-2020, the legislature included a provision for the State to sue cities with high levels of housing segregation. This measure would have the following effect:
Selected Answer:
relax regulations to promote the building of more Single Family Dwelling Units in California.
Question 11
In graph above,if rent control is set at $1000 per month then consumer surplus:
Selected Answer:
will remain the same because area E is a loss in producer surplus that cancelsoutthe gain in consumer surplus
Question 12
In the graph above showing the imposition of rent control
Selected Answer:
there will be a shortage of 100,000apartments.
Question 13
The Housing Choice Voucher Program (Section 8)has what direct impact on the market for affordable, privately-owned apartments in a local municipality?
Selected Answer:
The landlord receives a monthly rent that is below the market-clearing equilibrium in the citys housing market for a Section 8 unit.
Affordable Housing Policy QUIZ 1: (Sept 27)
Department of Housing and Urban Development (HUD) defines an “affordable dwelling” as onethat a household can obtain for 30 percent or less of its income. But this varies from city to city.
This Vox article provides an overview of Housing need in the US:
https://www.vox.com/2014/4/10/18076868/affordable-housing-explained?__c=1
And Review Questions for Quiz 1 are here
Affordable Housing Policy–
Three Policies: (QUIZ 1 will cover)
1. Rent Control? Public Choice
Politicians Favorite/supply incentives?
2. Tax Subsidy for the Housing Suppliers?
–Low Income Housing Tax Credit Program (LIHTC) Effect on Affordable Units Supplied (Front Line Documentary)?
3. Subsidize the Demand-side: Section 8 Housing -Vouchers (Big Ideas/Re-occuring Theme) CMTO
Housing Policy (Federal & State of California)
California Proposition 21 California Rent Control Ballot Measure
The Rental Affordability Act will remove current state law restrictions, giving cities and counties the power to implement and expand rent control policies that limit how much rents can increase each year. It would allow local communities to:
https://ballotpedia.org/California_Proposition_21,_Local_Rent_Control_Initiative_(2020)#Background
Housing Policy (Federal & State of California)
California Proposition 15– Tax on Commercial and Industrial Properties for Education and Local Government Funding Initiative (2020)
https://ballotpedia.org/California_Proposition_15,_Tax_on_Commercial_and_Industrial_Properties_for_Education_and_Local_Government_Funding_Initiative_(2020)
–the proposal to assess property taxes on commercial and industrial properties at market value, while continuing to assess taxes on residential properties based on the purchase price, is known assplit roll. Exempts small business and agriculture.
Use a Supply and Demand diagram to analyze the impact of an effective rent control law. Using the efficiency properties of the market equilibrium as a baseline, examine the effect of rent control on consumer and producer welfare. Would rent control result in a great quantity of affordable being made available? Does rent control increase consumer welfare (i.e., consumer surplus) in the short run?
Figure 4.9 The Economic Effect of a Rent Ceiling in REVEL Chapter 4
Without rent control, the equilibrium rent is $2,500 per month.
At that price, 2,000,000 apartments would be rented.
If the government imposes a rent ceiling of $1,500, the quantity of apartments supplied falls to 1,900,000, and the quantity of apartments demanded increases to 2,100,000, resulting in a shortage of 200,000 apartments.
California Housing Price Index
External Link to: Kahn Academy Video on Rent Control Dead Weight Cost
Political Economy
Gruber Ch. 1 Definition: Political Economy is the theory of how the political process produces decisions that affect individuals and the economy overall (individual economic agents are producers, consumers, business owners and workers).
Political Economy answers the question: why do governments do what they do?
Three types of questions in Public Economics
from Gruber, Chapter 1
Positive analysis: What are the observed effects of government programs and interventions (what is?)
Normative analysis: What should the government do if we can choose an optimal (socially efficient) policy intervention (what should be?)
Public Choice/Political Economy analysis: Develops theories to explain why the government behaves the way it does and identify optimal policy given political economy concerns
–Criticism of normative analysis: fails to take political constraints into account
Four Questions of Public Finance:
When should the government intervene in the economy?
How might the government intervene?
What is the effect of those interventions on economic outcomes?
Why do governments choose to intervene in the way that they do?
(from Gruber Chapter 1)
Note the important difference between this question and the second (How should governments intervene?). The second question is a normative question, one concerned with how things should be done. This is a positive question, one concerned with why things are the way they are (like the third question it involves positive economics).
What is the outcome of rent control?
New research examining how rent control affects tenants and housing markets offers insight into how rent control affects markets. While rent control appears to help current tenants in the short run, in the long run it decreases affordability, fuels gentrification, and creates negative spillovers on the surrounding neighborhood.
Brookings Institute, October 2018
[https://www.brookings.edu/research/what-does-economic-evidence-tell-us-about-the-effects-of-rent-control/ ]
2. Low Income Housing Tax Credit
(LIHTC) Program ( $10 billion/yr.)
FrontLine Documentary details the inflated costs associated with this supply-side program which subsidizes the construction or renovation of housing supplied for low income households. The subsidy (government payments) go to the suppliers of low-income housing.
Largest federal program to supporting the private provisioning (new construction and renovation) of rental housing for the poor.
Does little to deter further housing segregationPBS series Frontline
found that with little federal oversight, LIHTC has produced fewer units than it did 20 years ago, even though it’s costing taxpayers 66 percent more in tax credits.
In 1997, the program produced more than 70,000 housing units. But in 2014, fewer than 59,000 units were built, according to data provided by the National Council of State Housing Agencies.
3. Housing Choice Voucher Program Section 8 $ 20 billion (goes to 1 in 4 eligible households)
The Voucher can be spent on any housing and the low-income household pays 30 percent of their income, while the voucher goes to the landlord who receives the fair market value rent for the unit. So the government pays whatever portion of the rent that the low-income family cannot afford for the housing unit of their choice (to a landlord who agrees to take the Section 8 voucher).
Some 54 percent of families receiving additional basic services as part of a more targeted Creating Moves To Opportunity (CMTO) voucher program promoting high-opportunity neighborhoods, chose to move to opportunity neighborhoods compared to approximately 14 percent of families who received standard services from the public housing authorities.
Politics of Affordable Housing
https://slate.com/news-and-politics/2015/06/fair-housing-act-supreme-court-ruling-anthony-kennedy-and-the-court-acknowledge-that-disparate-impact-is-real.html
https://www.politico.com/news/2020/07/29/trump-housing-policy-low-income-suburbs-386414
Both issue weblinks cited above are not on the quiz, but they do underscore the relevance of the issue today.
REVEL Chapter 5:
Externalities and Private Market Failures
An Externality is a cost or benefit not taken into consideration when deciding what quantity of a good or service should be produced or consumed.
Benefits of the Move to Opportunity Experimental (MTO) Voucher Program
