1. Low-income housing policy

Suppose the City of Austin is considering policies to make housing more affordable, and that current residential rents, on average, are about $5 per square foot (ft²).Thus, we can think of households as trading off consumption of housing at a price of $5/ ft², and consumption of "all other goods" at a price of $1/unit.For simplicity, planners are considering the effects of each policy option on a family with an income of $2000 a month.

a. Draw budget lines associated with each of these options:

• A $500, non-tradable housing voucher.
• A monthly housing matching grant of $2.50/ ft², up to $500 per family.

b.Which of the two options described in part (a) will low-income families prefer? Explain your answer, with reference to the budget lines you drew for part (a).