A specific policy is described below, based o measures that have been introduced or proposed in the UK, in response to a chronic shortage of affordable houses in many regions.

Explain, using the 'demand-and-supply' model, the likely impact of this policy on the equilibrium quantity and price of houses, and how this might affect the UK's affordable housing shortage.

Policy: The UK government 'Help to Buy: Equity Loan' is a scheme that allows buyers of newly built homes to reduce the deposit needed to 5% while keeping mortgage to 75% thanks to a loan by the Government of the remaining 20% of the cost. If buyers stay in their home for at least five years they won't have to pay any loan fee on the government scheme. The government has also increased the limit of equity loan for London properties to 40% to reflect current property prices.

(Student Notes: It is advisable to assign at least one paragraph to each of the extracts - explaining how the policy is likely to change the equilibrium quantity of homes sold and their equilibrium price, through its effect on the supply curve and/or the demand curve. Make sure you distinguish, where relevant, between movements along a curve and shifts in one of these curves.)