Increased housing supply reduces private sector rents

Steps:

• Government increases public housing supply for low-income renters.
• This adds to total housing stock, shifting supply curve rightward.
• Low-income households move from private to public rentals, decreasing private sector demand.
• Combined effect lowers equilibrium rents in the private market.

Why C is correct:

• Law of supply and demand: greater overall supply and reduced private demand decrease private rents.

Why the others are wrong:

• A: Construction activity rises, boosting employment.
• B: More building likely increases land demand, raising prices.
• D: Housing construction elevates total government spending.

Final answer: C