Senate Bill 5 would create a $2 million annual grant program to provide recent college graduates with down-payment help on the purchase of a home in Ohio.
"If we truly want to get our economy back on track, Ohio cannot afford to lose the next generation of skilled workers to other states," said Sen. Stephen Buehrer, R-Delta, who is sponsoring the bill. "This program will provide an extra incentive for our best and brightest to purchase their own homes and become invested in our communities."
Under the proposal, Ohio residents could register within 60 days of graduating for a lottery that would award 300 grants ranging from $2,500 to $10,000 depending on the level of degree the graduate has earned. Recipients would have one year to use the grant.
Thought this was a good story for all of us students, plus it has some economic implications as well.
Here is a great an example of Ohio using incentives to keep housing prices down for first time home buyers. We know from the price ceiling lecture that rent controls and price controls do not work. They are not efficient at targeting the population who needs this help the most. In this system renters are looking for the best possible candidate. Also the quality of home drops significantly because there is no incentive for the person selling the apartment to fix anything or keep it nice.
Under this system all students who graduate have the same chance to get the money, they just put their name into a lotto. This way only their target market will get the money, college students graduating from an Ohio school. There is now an incentive for college students to stay in Ohio after graduating. This will keep prices low without hurting the quality of the home. This is a much more effective way to keep prices low for a targeted market.
I can see how this would be a good incentive for people to stay in Ohio. However, entering the lottery is an uncertain outcome, and some people might have other opportunities elsewhere. The probability of winning may be incredibly small, therefore the Expected Value of staying in Ohio for a lower paying job may not outweigh the Expected Value of going elsewhere for a better job. This may not keep as many recent grads in Ohio as the government might expect.
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