Suppose a property tax of $300 per month is legally (statutorily) imposed on the owners of rental housing. Which of the following is likely to occur?
A) The monthly rental rate paid by tenants would increase.
B) The quantity of rental housing available would decline.
C) There would be a deadweight loss (or excess burden) created in the rental housing market.
D) All of the above are likely to happen.

Question

Quizplus · Accepted Answer

A property tax imposed on rental housing owners creates an additional cost for them, which they may offset by increasing the monthly rental rate paid by tenants. However, a higher rental rate could discourage some prospective tenants from renting, which would reduce the demand for rental housing units. As a result, some landlords may withdraw their units from the market, leading to a decline in the available quantity of rental housing. This reduction in rental housing supply and demand creates a market inefficiency or deadweight loss. Therefore, all the options (A,B, and C) are likely to happen.

Suppose a Property Tax of $300 Per Month Is Legally