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Providing Subsidies for Housing in Cairo
Nearly one million people in Cairo, the capital city of Egypt, live in crowded, unhealthy housing. One reason why people lack basic necessities, including adequate housing, is unemployment. In 2019, nearly 10% of Cairo’s workers did not have a job. Other citizens of Cairo live in luxury, in houses costing more than $1 million. Many of Cairo’s rich adults grew up in rich families
Discuss whether a government should provide subsidies to families to spend on housing.
Economic Growth and Development
CIE O level June 2021!
Tip: Note how the facts given in the case study are used in the essay.
(Step 1: Define 'subsidy' in the introduction)
It can be debated whether a subsidy should be given to families to spend on housing. A housing subsidy is a payment made by the government to families, with the objective to reduce the amount they spend to buy a house. Cairo will be taken as an example in this essay, where nearly one million people, live in crowded, unhealthy housing.
(Step 2: Discuss the arguments in favor of a subsidy on housing)
There are several reasons why a government should provide housing subsidies
🏠 Purchasing power will increase
Housing subsidies will increase the purchasing power of the families who receive them. Not only will lower-income families be able to afford a house, but they will also have spare money to spend on other necessities such as education.
🏠 Poverty will be reduced
Low-income families will be able to benefit from adequate housing and this will prevent overcrowding. If the government provides housing subsidies, families will be able to spend the money saved on other basic goods and services such as food, healthcare and education. Furthermore, families may be able to afford better quality housing.
🏠 Jobs will be created
The demand for housing will be boosted, in turn, creating jobs in the housebuilding sector e.g carpenters, electricians etc... This will be beneficial in Cairo, where in 2019, nearly 10% of Cairo’s workers did not have a job.
(Step 3: Discuss the arguments against a subsidy on housing)
There are several reasons why a government should not provide housing subsidies
🏠 Burden on taxpayers
Some families may be rich enough to afford a house and it would be a waste of taxpayer's money to provide rich families with housing subsidies. For example, the richer citizens of Cairo live in luxury, in houses costing more than $1 million. Furthermore, taxes may need to be raised in order to finance these subsidies.
🏠 There will be opportunity costs
The money spend providing housing subsidies could have been spent on building the country's human capital through developing a better education system. The very reason why people cannot afford adequate housing in Cairo is because of unemployment. Thus if the money spent on housing subsidies were instead spent on education and training, people would be able to find jobs and in turn, buy housing.
🏠 Building more houses may result in environmental damage
The sudden increased demand for new houses may cause rapid environmental damage such as massive deforestation. Not only will forests be cut down to build houses, but for raw materials such as wood.
🏠 There may be inflation
If the government provides subsidies for housing, the rise in demand for houses may be matched by increasing prices for raw materials such as cement, wood and glass. The increased demand for houses will also boost demand for complementary goods such as furniture and carpets, whose prices may also rise. This can give rise to inflation.
(Step 4: Provide a sound conclusion)
To conclude, providing housing subsidies to lower-income families may be particularly useful if the population is growing rapidly. Affordable housing is essential to contributing to national socio-economic development. However, the burden on taxpayers should be taken into account. It would also be preferable if this subsidy was adopted alongside other policies to boost employment. This makes sense if unemployment is the reason why people cannot afford housing in the first place.