The construction industry is no stranger to subsidies, with many projects being funded by public money. Research has shown that there is a positive correlation between subsidies and the cost of construction, while value added taxes have an inverse relationship. This means that subsidies can increase the cost of housing, while value added taxes can reduce the cost for the builder. A win-win model has been developed for both parties, with a government-subsidized assembler, a government-subsidized manufacturer, and consumers subsidized by the government.
This article seeks to explore the relationship between production and construction costs and their determinants, such as interest rates, per capita income, housing production, and policy instruments such as changes in housing construction subsidies and value added taxes. Previous literature has mainly focused on the cost, orders, and supply chain management of prefabricated construction. However, there are relatively few studies on pricing. When the government subsidizes the manufacturer, they will lower the wholesale price.
Prefabricated construction is likely to become the focus of future development in the industry. In 1975, the cost of production was almost 10 percent higher than it would have been without subsidies. When the government directly subsidizes the manufacturer, the wholesale price is lowest and is inversely proportional to value added taxes. This suggests that government subsidy policies can generate more profits for prefabricated construction companies and make them more likely to adopt prefabricated construction.
With increasing demand from governments and the public for environmental protection, many countries are promoting prefabricated construction. Reducing the wholesale price may increase demand for prefabricated buildings. Per capita income has a greater impact on production costs than on construction costs, while interest rates and competition have an opposite effect.Our results indicate that builders can transfer much of the tax burden to developers (and eventually to the final consumer of the home). In conclusion, subsidies can have a significant impact on the construction industry by increasing costs or reducing them depending on how they are used.