Case Study Salt Lake City

The prices and sales of the local housing market in Salt Lake City has increased rapidly in recent years, causing a housing shortage with strong demand but inadequate supply in all three markets- apartments, existing homes and housing under construction. Producers have sold all inventory, having reached peak capacity with some demand still not met. Though apartment numbers have been increasing at a historic rate, apartment vacancy rates are at its lowest. Labor shortage, high land prices, municipal zoning fees and regulations resulted in higher costs of production, passing on to the consumers through higher prices. Accordingly, home sales and prices are expected to keep rising in 2017, threatening affordability.

The rapidly increasing population …show more content…
It aims to lower the price of essential goods or to ensure that products deemed necessary for the economy are supplied sufficiently. Costs of production decrease for the suppliers resulting in lower price for consumers, increasing demand and thus, consumption. In theory, the supply curve for houses will shift vertically downwards by the amount of subsidy given. The shift means more is supplied at every price. As seen from the graph below, if a subsidy by the amount (W-Z) is granted to housing firms, the supply curve shifts vertically downwards from S to Safter subsidy, reaching a new equilibrium point. The equilibrium price drops from P2 to P1, the original price before the increase in demand. Now at P1, Q3 is both demanded and supplied. Before the subsidy, if producers kept the price at P1, there would have been excess demand where consumers demand Q3 but only Q1 being supplied. With costs decreased, increased supply and affordability to first-time buyers and low-income families, subsidizing firms in the housing industry will in theory solve the