Government Intervention in the Housing Market and Is It Ethical?

Topics: Economics, Government, Real estate Pages: 4 (1232 words) Published: March 26, 2013
Government Intervention in the Housing Market and is it Ethical?

Intermediate Microeconomics

Two schools of thought encompass the intervention of government into the national economy. On the one hand there are those who believe that state intervention is not only beneficial but also essential for the creation of a stable economy. However, there too are those who contend that government intervention sub-optimises the economy and the free market should be left to its own devices. The current state of the domestic housing market helps to build a foundation for those who advocate for greater government intervention in the economy. Owning your own home is for many a life-long goal; government intervention has the ability to bring this dream to fruition for those in lower socioeconomic circumstances. A combination of taxation, subsidised mortgage rates and government incentive schemes are the most commonly used tools of intervention into the housing market that are available to interventionist national governments. Opponents of this theory believe that letting the free market regulate the housing sector is the fairest and most effective means of reducing or eliminating government intervention all together. There are, however, ethical issues intertwined with government intervention within the housing market and these issues must be weighed up against the economic and social benefits.

Without regulation many would find homeownership to be unaffordable and unattainable. Microeconomic theory states that lower rates of owner-occupied homeownership would affect the supply and demand for housing within the residential market. Therefore forcing the price of rentable property well above what many lower socioeconomic families are able to afford. This subsequently has a flow-on effect, rates of home ownership tend to be in lower in areas of low socioeconomic standing, where unemployment is high, income is low and consumer confidence is down. A desire to increase the...

References: Greenspan, A. (2011). Imagining a Housing Market Without Government Intervention. Retrieved 25-09-2012, 2012
Poterba, J. M. (1989). Residential Real Estate and Capital Formations. Regional Science and Economics.
Hennessey, S. M. (2001). The Impact of the Tenure Choice Decision on Future Household Wealth.
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