Labor force and construction costs
A shortage of skilled labor or building materials or an increase in the cost of materials can decrease the amount of new construction. Construction permit fees and high property transfer costs can also discourage development. An attempt may be made to pass increased construction costs along to buyers and Tenants in the form of higher prices and increased rents, which can further slow the market.
Local governments also can influence supply. Land-use controls, building codes, and zoning ordinances help shape the character of a community and control the use of land. These local controls usually add costs to the development and maintenance of buildings and property in the form of fees, etc.
Governmental Financial Policies
The government’s monetary policy can have a substantial impact on the Real Estate market.
Governmental agencies, such as the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA), also have an impact on the rental market through their Vouch (Section 8) and various subsidized rental programs. Additionally, State and Municipal programs are available to aid Renters.
Policies on the taxation of Real Estate can have both significant and complex effects on the Real Estate market. Real Estate taxation is a necessary source of revenue for local governments. Real Estate taxation is a necessary source of revenue for local governments. High taxes may deter investors but may be necessary to maintain continued economic growth within the community. Tax incentives can attract new businesses and industries. Of course, one of the largest expenses in an operating budget for an apartment building is Real Estate taxes. This expense has a very important effect on the rend, which a Landlord has to charge to earn a return on his investment.