How does universal basic income not mean rent going up the same amount?
October 17, 2022 6:23 AM Subscribe
What it says on the tin. I'm not for or against UBI, I'm aware of the concept and it sounds interesting. But I am too stupid to understand it, because everyone keeps talking about UBI, and I can't imagine how if there was UBI, landlords wouldn't just go, "OK, you have an extra [UBI] a month? Guess what, your next month's rent is [current rent + UBI}." I need someone to explain to me how that isn't exactly what happens. I can understand most of the economics argument, but I'm missing this particular part, and I don't even know where to look for the answer. Who's got the papers, blog articles, and Tweet threads such to explain how UBI isn't just a wealth transfer to rentiers?
There are two separate questions: What effect would it have on overall inflation? What effect might it have on local inflation, such as rents in a neighborhood where many people would increase their spending when UBI increased?
For the first, as anyone who's followed the debate over the causes of inflation in recent months knows, it depends on a lot of factors, but there's general economic consensus that excess government spending leads to inflation when the economy is at potential. The debate is what "excess" and "potential" means (and to some extent what "leads to" means). But yes, most economists would agree that the spending would have to be paid for, and taxing the wealthy is one good way. Carbon taxes would be another good way. However, unless the program was a huge portion of government spending, the effects on inflation would likely be small even if it wasn't paid for.
On the question of local inflation, again, in your example, some of the gains would be taken by producers or owners of whatever the recipients were buying more of. But your example of 100 percent pass through would apply only in a world where the recipients were spending all of their money on housing and there was a fixed stock of housing.
In real life, it doesn't seem to be a problem. One study in Kenya of a program that made transfers of 15 percent of local GDP found that it increased inflation by only 0.1 percent.
posted by Mr.Know-it-some at 6:54 AM on October 17, 2022 [4 favorites]
For the first, as anyone who's followed the debate over the causes of inflation in recent months knows, it depends on a lot of factors, but there's general economic consensus that excess government spending leads to inflation when the economy is at potential. The debate is what "excess" and "potential" means (and to some extent what "leads to" means). But yes, most economists would agree that the spending would have to be paid for, and taxing the wealthy is one good way. Carbon taxes would be another good way. However, unless the program was a huge portion of government spending, the effects on inflation would likely be small even if it wasn't paid for.
On the question of local inflation, again, in your example, some of the gains would be taken by producers or owners of whatever the recipients were buying more of. But your example of 100 percent pass through would apply only in a world where the recipients were spending all of their money on housing and there was a fixed stock of housing.
In real life, it doesn't seem to be a problem. One study in Kenya of a program that made transfers of 15 percent of local GDP found that it increased inflation by only 0.1 percent.
posted by Mr.Know-it-some at 6:54 AM on October 17, 2022 [4 favorites]
landlords wouldn't just go, "OK, you have an extra [UBI] a month? Guess what, your next month's rent is [current rent + UBI}."
Because not everyone has a landlord [like ~40%+ of the US outright owns their home], not everyone's rent is increasing at the same rate, not all houses or rental situations are equally desirable, and housing prices are set by 'the market', not by the whims of evil landlords.
If they could unilaterally raise rent, why wait for some theoretical UBI? Why not just do it now?
posted by The_Vegetables at 7:30 AM on October 17, 2022 [2 favorites]
Because not everyone has a landlord [like ~40%+ of the US outright owns their home], not everyone's rent is increasing at the same rate, not all houses or rental situations are equally desirable, and housing prices are set by 'the market', not by the whims of evil landlords.
If they could unilaterally raise rent, why wait for some theoretical UBI? Why not just do it now?
posted by The_Vegetables at 7:30 AM on October 17, 2022 [2 favorites]
Where do you live where landlords can just arbitrarily raise rent based on your income? Aren't there laws to restrict that?
By law my landlord can only raise the rent a certain percent each year (I think it's 2.8), which she does. She can't legally raise it higher or more often.
posted by dobbs at 7:35 AM on October 17, 2022 [6 favorites]
By law my landlord can only raise the rent a certain percent each year (I think it's 2.8), which she does. She can't legally raise it higher or more often.
posted by dobbs at 7:35 AM on October 17, 2022 [6 favorites]
The 2nd half of your question - economists basically treat rent and for-purchase housing prices as completely separate, but research is on-going that states rent is basically a function of purchase price opportunities and purchase supply availability - so if supply increases appropriately (California is finally passing some good laws here!!!!) then rental prices will fall too. We will have to see unfortunately is the answer.
posted by The_Vegetables at 7:38 AM on October 17, 2022
posted by The_Vegetables at 7:38 AM on October 17, 2022
The best place to start in general is to find both orthodox and heterodox arguments on how inflation happens and works. Then even more explicitly partisan arguments. Then a political solution like UBI will hopefully look clearer to you because the crux of your question depends very much on how you would perceive consumer inflation would be in anticipation or reaction to policy measures. It may be that you can't quite wrap your mind around this because it feels objective to say that a rise in earnings will result in a rise in prices. The main crux of UBI and the overarching policy it's related to, Modern Monetary Theory, is responding to this view on inflation. It's an entirely different philosophy, which means even the intended trajectory is different (in fact the main point for UBI and MMT would be to deemphasize inflation as a policy risk as they don't consider it (CONSUMER inflation) to have a 1:1 relationship to policy, eta: as a policy consequence, in the first place).
posted by cendawanita at 7:40 AM on October 17, 2022 [1 favorite]
posted by cendawanita at 7:40 AM on October 17, 2022 [1 favorite]
To tackle your landlord scenario more specifically, here would be some of my responses:
- 'rent' is a contingent concept but what it is contingent to, depends on who you ask and the available evidence. Is it pricing in response to available stock? (Classic econs) is it in response to perceived market elasticity? (Still classic econs)
- housing should exist in conversation with the rest of the market unless it's gone hot and irrational (then it doesn't respond to signals as smoothly, according to theory).
-- economic answer: well, not all housing is tenant-based
-- political answer: well, tenants don't make up a significant demographic (perhaps because they sort themselves according to other categorisation).
- UBI supposes additional income for everyone. If all landlords tack on the gains to their rent, what's to stop other enterprises? That's one response. Would all landlords increase to that extent? Probably not, and there's an aggregate argument to be made it would shake out in the market and people go to better locations, so there's economic motivation to not increase the rent too much. That's a different scenario than yours though (which is fairly easy enough to deny even in orthodox thinking).
- where's the other policy measures that could respond to this anticipated rise?
- this is where actual trained in modelling economists can probably give you a better response as well, in terms of citations. But truly this is at this point a philosophical break, because inflation and what it is is what's being debated on at the core of it.
posted by cendawanita at 7:56 AM on October 17, 2022 [1 favorite]
- 'rent' is a contingent concept but what it is contingent to, depends on who you ask and the available evidence. Is it pricing in response to available stock? (Classic econs) is it in response to perceived market elasticity? (Still classic econs)
- housing should exist in conversation with the rest of the market unless it's gone hot and irrational (then it doesn't respond to signals as smoothly, according to theory).
-- economic answer: well, not all housing is tenant-based
-- political answer: well, tenants don't make up a significant demographic (perhaps because they sort themselves according to other categorisation).
- UBI supposes additional income for everyone. If all landlords tack on the gains to their rent, what's to stop other enterprises? That's one response. Would all landlords increase to that extent? Probably not, and there's an aggregate argument to be made it would shake out in the market and people go to better locations, so there's economic motivation to not increase the rent too much. That's a different scenario than yours though (which is fairly easy enough to deny even in orthodox thinking).
- where's the other policy measures that could respond to this anticipated rise?
- this is where actual trained in modelling economists can probably give you a better response as well, in terms of citations. But truly this is at this point a philosophical break, because inflation and what it is is what's being debated on at the core of it.
posted by cendawanita at 7:56 AM on October 17, 2022 [1 favorite]
Where do you live where landlords can just arbitrarily raise rent
I mean, this is much of the US right now - my landlord tried to raise my rent 13% recently, some people I know recently had their rent hiked up by more than double that - so I agree, it stands to reason that you'd want to make a Federal law preventing that before instituting a UBI.
posted by coffeecat at 7:58 AM on October 17, 2022 [24 favorites]
I mean, this is much of the US right now - my landlord tried to raise my rent 13% recently, some people I know recently had their rent hiked up by more than double that - so I agree, it stands to reason that you'd want to make a Federal law preventing that before instituting a UBI.
posted by coffeecat at 7:58 AM on October 17, 2022 [24 favorites]
You’re on the right track; if the supply of apartments stays the same, there will be more money chasing the same number of apartments and the net effect will be rents going up.
Doesn’t mean UBI and policies like it are a bad idea, but we also need policies to allow+build more housing.
posted by ripley_ at 8:06 AM on October 17, 2022 [3 favorites]
Doesn’t mean UBI and policies like it are a bad idea, but we also need policies to allow+build more housing.
posted by ripley_ at 8:06 AM on October 17, 2022 [3 favorites]
I can't imagine how if there was UBI, landlords wouldn't just go, "OK, you have an extra [UBI] a month? Guess what, your next month's rent is [current rent + UBI}."
I think it's mainly that the price of rent, like the price of everything else, is bound up in the balance between the supply of and the demand for the thing being paid for. Perturb any of these three things and the other two will respond accordingly even though the supply response is often the slowest.
And yes, a UBI would increase the price that people were willing to pay for housing, given that it would give everybody more money to spend. But even leaving aside all the legal protections against unconscionable and arbitrary rent rises that exist in so many jurisdictions, I don't see how that would automatically make people more willing to pay big increases on the same housing that they were in before the UBI got introduced.
So I think you'd find some people moving into places where the rent was more expensive than they could previously afford, and I can see no reason why this wouldn't happen at every price point in the housing market, including a substantial cohort at the low end who had been previously unable to afford rent at all.
The more expensive the market segment, though, the less difference the UBI would make to people renting in that segment. So I can't see the housing market responding by increasing the stock of high-end rentals, because I don't think the advent of the UBI would increase competition for living space anywhere near as intensely at the high end. I can see the market responding relatively more strongly in less expensive tiers, and the lower the cost of the rental segment the more new stock I would expect to see added to it.
So yes, rentiers would end up extracting more money from the housing market in aggregate, but largely as a consequence of more housing getting built; which seems to me to be a good thing.
Much the same line of argument can be applied to the price of everything else, not just rent. The idea that everybody's UBI would be instantly soaked up by sudden price rises from rapacious vendors of everything pretty much ignores the whole phenomenon of price competition which, although obviously not the be-all and end-all that the laissez-faire wingnuts would have us all believe, is actually a thing.
posted by flabdablet at 8:08 AM on October 17, 2022 [3 favorites]
I think it's mainly that the price of rent, like the price of everything else, is bound up in the balance between the supply of and the demand for the thing being paid for. Perturb any of these three things and the other two will respond accordingly even though the supply response is often the slowest.
And yes, a UBI would increase the price that people were willing to pay for housing, given that it would give everybody more money to spend. But even leaving aside all the legal protections against unconscionable and arbitrary rent rises that exist in so many jurisdictions, I don't see how that would automatically make people more willing to pay big increases on the same housing that they were in before the UBI got introduced.
So I think you'd find some people moving into places where the rent was more expensive than they could previously afford, and I can see no reason why this wouldn't happen at every price point in the housing market, including a substantial cohort at the low end who had been previously unable to afford rent at all.
The more expensive the market segment, though, the less difference the UBI would make to people renting in that segment. So I can't see the housing market responding by increasing the stock of high-end rentals, because I don't think the advent of the UBI would increase competition for living space anywhere near as intensely at the high end. I can see the market responding relatively more strongly in less expensive tiers, and the lower the cost of the rental segment the more new stock I would expect to see added to it.
So yes, rentiers would end up extracting more money from the housing market in aggregate, but largely as a consequence of more housing getting built; which seems to me to be a good thing.
Much the same line of argument can be applied to the price of everything else, not just rent. The idea that everybody's UBI would be instantly soaked up by sudden price rises from rapacious vendors of everything pretty much ignores the whole phenomenon of price competition which, although obviously not the be-all and end-all that the laissez-faire wingnuts would have us all believe, is actually a thing.
posted by flabdablet at 8:08 AM on October 17, 2022 [3 favorites]
Sheesh it's kinda unlikely that the hypothetical conversation with the landlord would ever occur. But over a few transitions the rent would go up for the new renters. The rate changes would be over a year or two rather than the day after UBI checks are mailed. And as quietly as most of the evil landlords could manage.
posted by sammyo at 8:10 AM on October 17, 2022 [2 favorites]
posted by sammyo at 8:10 AM on October 17, 2022 [2 favorites]
I'm not sure you're taking into account that people who are working also pay rent, and wages are not tied to UBI. Although UBI might increase wages if people don't "have to" work -- businesses would probably go out of business as things adjusted but the survivors would pay better wages -- it would happen more slowly, and probably mostly at the bottom of the wage scale (around minimum.)
It's possible that at the lowest end of the market some rents would go up (without rent control, which exists in my province - you can't increase someone's rent more than a small percentage a year without renovicting, which does happen.) But not all rents would go up immediately.
posted by warriorqueen at 8:25 AM on October 17, 2022
It's possible that at the lowest end of the market some rents would go up (without rent control, which exists in my province - you can't increase someone's rent more than a small percentage a year without renovicting, which does happen.) But not all rents would go up immediately.
posted by warriorqueen at 8:25 AM on October 17, 2022
Where do you live where landlords can just arbitrarily raise rent based on your income? Aren't there laws to restrict that?
Rent control is rare in the USA. I've lived in many places, and landlords can generally charge whatever the market will bear.
posted by NotLost at 8:39 AM on October 17, 2022 [9 favorites]
Rent control is rare in the USA. I've lived in many places, and landlords can generally charge whatever the market will bear.
posted by NotLost at 8:39 AM on October 17, 2022 [9 favorites]
...housing prices are set by 'the market', not by the whims of evil landlords...
Not anymore... "Rent Going Up? One Company’s Algorithm Could Be Why."
The recent dramatic increases in rent, are related to REIT's and other similar companies buying up vast amounts of traditional housing stock - these companies then need to maximize their rental profits...
Some choice pull-quotes from the above article:
Agents sometimes hesitated to push rents higher. Roper said they were often peers of the people they were renting to. "We said there's way too much empathy going on here," he said. "This is one of the reasons we wanted to get pricing off-site." [...] "The net effect of driving revenue and pushing people out was $10 million in income," Campo said. "I think that shows keeping the heads in the beds above all else is not always the best strategy." [...]
The company had been seeking occupancy levels of 97% or 98% in markets where it was a leader, Winn said. But when it began using YieldStar, managers saw that raising rents and leaving some apartments vacant made more money. [...]
Davidoff said he was careful to avoid features that might run counter not only to anti-discrimination laws, such as the Fair Housing Act, but also those that bar competitors from conspiring to set prices. [...]
Maureen K. Ohlhausen, who was then the acting chair of the Federal Trade Commission, said in a 2017 talk that it could be problematic if a group of competitors all used the same outside firm's algorithm to maximize prices across a market.
She suggested substituting "a guy named Bob" everywhere the word algorithm appears.
"Is it OK for a guy named Bob to collect confidential price strategy information from all the participants in a market and then tell everybody how they should price?" she said. "If it isn't OK for a guy named Bob to do it, then it probably isn't OK for an algorithm to do it either."
posted by rozcakj at 8:51 AM on October 17, 2022 [12 favorites]
Not anymore... "Rent Going Up? One Company’s Algorithm Could Be Why."
The recent dramatic increases in rent, are related to REIT's and other similar companies buying up vast amounts of traditional housing stock - these companies then need to maximize their rental profits...
Some choice pull-quotes from the above article:
Agents sometimes hesitated to push rents higher. Roper said they were often peers of the people they were renting to. "We said there's way too much empathy going on here," he said. "This is one of the reasons we wanted to get pricing off-site." [...] "The net effect of driving revenue and pushing people out was $10 million in income," Campo said. "I think that shows keeping the heads in the beds above all else is not always the best strategy." [...]
The company had been seeking occupancy levels of 97% or 98% in markets where it was a leader, Winn said. But when it began using YieldStar, managers saw that raising rents and leaving some apartments vacant made more money. [...]
Davidoff said he was careful to avoid features that might run counter not only to anti-discrimination laws, such as the Fair Housing Act, but also those that bar competitors from conspiring to set prices. [...]
Maureen K. Ohlhausen, who was then the acting chair of the Federal Trade Commission, said in a 2017 talk that it could be problematic if a group of competitors all used the same outside firm's algorithm to maximize prices across a market.
She suggested substituting "a guy named Bob" everywhere the word algorithm appears.
"Is it OK for a guy named Bob to collect confidential price strategy information from all the participants in a market and then tell everybody how they should price?" she said. "If it isn't OK for a guy named Bob to do it, then it probably isn't OK for an algorithm to do it either."
posted by rozcakj at 8:51 AM on October 17, 2022 [12 favorites]
You are right that it can't just be UBI. We're probably going to have to eat the landlords first.
In places like Los Angeles - you may have heard our lovely councilpersons shit-talking one councilmember because she "has all the renters" (who are ugly and mostly from a specific part of Mexico, one of them noted, because racism is definitely not involved in this problem at all) and needed her lines re-drawn or something might happen to favor renters at least once - landlords would literally come do a dance at your front door and kick it in and demand you sign your check directly over to them, and then all relevant law enforcement entities would show up four months later (if you still live there) and take a report and lay it gently on the ground to poop on.
LA landlords increase rent the maximum allowed amount every year as a matter of course unless they have code violations they're afraid will be reported - in which case they generally wait until the tenant gives up and leaves and then list the property and accept hundreds or thousands of applications with application fees in lieu of actually renting the place. They do all this because they can. The amount of fuckery from LA landlords around COVID restrictions and support funds was staggering and entirely predictable.
There are tiny dots of rent control in LA County, all the rest is whatever the market will bear. Our rent went up by a thousand dollars over 9 years, and he'll probably get away with renting it for an additional $4-600/month when it goes back on the market.
UBI is a critically important component of an entire system of support. In the current US environment, it's likely that a real UBI system would involve the Section 8 housing system, which is already subject to wild discrimination and abuse by landlords. Who, again, generally need to be eaten. Corporate landlords and private equity companies first. This will require regulation, the kind that will anger congresspersons' largest donors to the point of possible assassination so I think the chances of this ever happening in the US - everywhere, across the board - are either zero or at least unfeasible until post-apocalypse.
posted by Lyn Never at 9:00 AM on October 17, 2022 [3 favorites]
In places like Los Angeles - you may have heard our lovely councilpersons shit-talking one councilmember because she "has all the renters" (who are ugly and mostly from a specific part of Mexico, one of them noted, because racism is definitely not involved in this problem at all) and needed her lines re-drawn or something might happen to favor renters at least once - landlords would literally come do a dance at your front door and kick it in and demand you sign your check directly over to them, and then all relevant law enforcement entities would show up four months later (if you still live there) and take a report and lay it gently on the ground to poop on.
LA landlords increase rent the maximum allowed amount every year as a matter of course unless they have code violations they're afraid will be reported - in which case they generally wait until the tenant gives up and leaves and then list the property and accept hundreds or thousands of applications with application fees in lieu of actually renting the place. They do all this because they can. The amount of fuckery from LA landlords around COVID restrictions and support funds was staggering and entirely predictable.
There are tiny dots of rent control in LA County, all the rest is whatever the market will bear. Our rent went up by a thousand dollars over 9 years, and he'll probably get away with renting it for an additional $4-600/month when it goes back on the market.
UBI is a critically important component of an entire system of support. In the current US environment, it's likely that a real UBI system would involve the Section 8 housing system, which is already subject to wild discrimination and abuse by landlords. Who, again, generally need to be eaten. Corporate landlords and private equity companies first. This will require regulation, the kind that will anger congresspersons' largest donors to the point of possible assassination so I think the chances of this ever happening in the US - everywhere, across the board - are either zero or at least unfeasible until post-apocalypse.
posted by Lyn Never at 9:00 AM on October 17, 2022 [3 favorites]
Eh I always thought UBI was supposed to work so that for people with a salary, their salary would be reduced by the value of the UBI. So, if I earn £50K, and a UBI of £15K is introduced, my overall income thereafter remains £50K, made up of £15K UBI and £35K salary (with my employer paying a chunk more to the Govt to help pay for UBI, funded by the savings made on my salary). My income doesn’t rise to £65K.
So UBI doesn’t raise everyone’s income, it just provides a guaranteed safety net at the bottom end because that £15K is always there; it replaces benefits and saves the expense of assessing who is eligible for them.
I may have got that totally wrong, though, but it’s how I always thought UBI was intended to work.
posted by penguin pie at 9:48 AM on October 17, 2022 [1 favorite]
So UBI doesn’t raise everyone’s income, it just provides a guaranteed safety net at the bottom end because that £15K is always there; it replaces benefits and saves the expense of assessing who is eligible for them.
I may have got that totally wrong, though, but it’s how I always thought UBI was intended to work.
posted by penguin pie at 9:48 AM on October 17, 2022 [1 favorite]
One landlord will only raise it 90 percent of UBI to be more attractive to tenants. Then another will go down to 85 percent and so on. Increased competition between landlords is what will benefit renters in the long run. To make that a reality, we need more housing, period.
posted by soelo at 10:13 AM on October 17, 2022 [2 favorites]
posted by soelo at 10:13 AM on October 17, 2022 [2 favorites]
The company had been seeking occupancy levels of 97% or 98% in markets where it was a leader, Winn said. But when it began using YieldStar, managers saw that raising rents and leaving some apartments vacant made more money.
The algorithm only works because there's not enough housing. Occupancy levels of 97% are so high, the company doesn't even need to advertise empty units. I guess if they remained that high, we'd need some 'advertising control' for all the apartment locator firms to retain their employees.
85-90% is considered a healthy occupancy rate.
posted by The_Vegetables at 10:20 AM on October 17, 2022
The algorithm only works because there's not enough housing. Occupancy levels of 97% are so high, the company doesn't even need to advertise empty units. I guess if they remained that high, we'd need some 'advertising control' for all the apartment locator firms to retain their employees.
85-90% is considered a healthy occupancy rate.
posted by The_Vegetables at 10:20 AM on October 17, 2022
It can't JUST be UBI, it has to be UBI plus increased taxes on wealthy.
Whoa, where'd this assumption come from? Many ways to pay for UBI: just one example, by reallocating a fragment of the DoD budget. Or even via quantitative easing.
posted by Rash at 10:38 AM on October 17, 2022
Whoa, where'd this assumption come from? Many ways to pay for UBI: just one example, by reallocating a fragment of the DoD budget. Or even via quantitative easing.
posted by Rash at 10:38 AM on October 17, 2022
for people with a salary, their salary would be reduced by the value of the UBI.
Wow, I always thought UBI worked by everyone gets a cheque, and then people who have an income over XXX get the same amount (or same amount less a bit to sweeten the pot) taken back in taxes. Which does reduce the take-home pay but at the tax step, not at the 'what is your salary' step.
posted by warriorqueen at 10:48 AM on October 17, 2022 [1 favorite]
Wow, I always thought UBI worked by everyone gets a cheque, and then people who have an income over XXX get the same amount (or same amount less a bit to sweeten the pot) taken back in taxes. Which does reduce the take-home pay but at the tax step, not at the 'what is your salary' step.
posted by warriorqueen at 10:48 AM on October 17, 2022 [1 favorite]
UBI isn't usually officially linked to housing stock in any scheme I can recall. Rents are more about supply and demand, and what the market will bear.
If UBI means more people can afford to rent in your area, and want to rent in your area, demand is increased, then rents go up.
If UBI means landlord can raise rents without problems filling tenancies, that also means rents go up.
UBI can directly lead to both scenarios as inflationary effects. However, both scenarios are not officially "allowed" by UBI. It can affect both rents in desirable San Francisco neighborhoods, where lots of people would like to live, and in Hooterville, Nowhere, where people can now afford to live, in housing that's otherwise rotting away, despite the lack of local employment opportunities.
posted by 2N2222 at 11:03 AM on October 17, 2022
If UBI means more people can afford to rent in your area, and want to rent in your area, demand is increased, then rents go up.
If UBI means landlord can raise rents without problems filling tenancies, that also means rents go up.
UBI can directly lead to both scenarios as inflationary effects. However, both scenarios are not officially "allowed" by UBI. It can affect both rents in desirable San Francisco neighborhoods, where lots of people would like to live, and in Hooterville, Nowhere, where people can now afford to live, in housing that's otherwise rotting away, despite the lack of local employment opportunities.
posted by 2N2222 at 11:03 AM on October 17, 2022
warriorqueen, I’m probably totally wrong, it was probably just as assumption on my part. I guess in either case, the key thing is that introducing UBI doesn’t suddenly push up the overall income of people who are already earning a reasonable amount, only those earning less than the UBI.
posted by penguin pie at 11:04 AM on October 17, 2022 [1 favorite]
posted by penguin pie at 11:04 AM on October 17, 2022 [1 favorite]
I'm assuming you're using rent as a stand-in for ... well, all basic needs here. I mean, if the landlords would try to take all of the UBI then so would grocery stores and gas stations and everyone else. It makes the situation very complicated as all of those different products have different price pressures.
posted by Tell Me No Lies at 11:31 AM on October 17, 2022
posted by Tell Me No Lies at 11:31 AM on October 17, 2022
Where I'm from, there's lots of empty housing and room for lots more, but no jobs. With UBI, people could live there.
posted by flimflam at 1:48 PM on October 17, 2022 [1 favorite]
posted by flimflam at 1:48 PM on October 17, 2022 [1 favorite]
The dumb but simple answer is: no one knows because economics is complicated.
I'll argue by analogy. Take the minimum wage increase. The intuitive argument against minimum wage increases is that as you increase the minimum wage, unemployment increases, because employers will employ fewer people due to the added costs. Thus, increasing minimum wage will be counterproductive to some degree. The workers that manage to not be laid off will fare better, but many workers will now be unemployed and worse off than without the wage increase.
For a period, this was the consensus by economists. Over the decades however, empirical studies have to a great degree complicated this picture, and that minimum wage increases may not affect employment to the degree thought, and now there is no longer any consensus on the impact that the minimum wage has on employment.
UBI may or may not cause rent to go up the same amount or some proportional amount. Why would it not? Because, like minimum wage and employment, and many other economic relations, this stuff is immeasurably complicated, and no one really knows, except that it may just work that way.
If you're interested, look into the minimum wage discussion. There's a prodigious amount of work and talk out there that will help illustrate why things aren't so simple as it seems.
posted by TheLinenLenin at 2:18 PM on October 17, 2022 [2 favorites]
I'll argue by analogy. Take the minimum wage increase. The intuitive argument against minimum wage increases is that as you increase the minimum wage, unemployment increases, because employers will employ fewer people due to the added costs. Thus, increasing minimum wage will be counterproductive to some degree. The workers that manage to not be laid off will fare better, but many workers will now be unemployed and worse off than without the wage increase.
For a period, this was the consensus by economists. Over the decades however, empirical studies have to a great degree complicated this picture, and that minimum wage increases may not affect employment to the degree thought, and now there is no longer any consensus on the impact that the minimum wage has on employment.
UBI may or may not cause rent to go up the same amount or some proportional amount. Why would it not? Because, like minimum wage and employment, and many other economic relations, this stuff is immeasurably complicated, and no one really knows, except that it may just work that way.
If you're interested, look into the minimum wage discussion. There's a prodigious amount of work and talk out there that will help illustrate why things aren't so simple as it seems.
posted by TheLinenLenin at 2:18 PM on October 17, 2022 [2 favorites]
Historically you are correct.
It frequently happens that the base rate for social assistance of whatever sort is raised by a cost of living increase, say 6%. And the following month right across the board all the low end landlords raise their rent by that exact dollar amount. And since the amount they raise it is only 6% of the already low social assistance benefit, they are usually within legal parameters with the rent increase.
Now UBI is not going to have such a tidy little exactly matching sum. But let's say, hypothetically the social assistance rate for an area is $800 per month. The next question is what will the UBI be? The social assistance rate is supposed to be calculated to be a livable basic income, so theoretically the UBI in the area will be $800 too. Now $800, the standard social assistance rate is usually not a livable amount, and as a result of the fact that there is no contingency built in, people on social assistance are often eligible for additional benefits, such as prescriptions, or food stamps, or a bus pass, or a back to school allowance for parents with school aged kids. But in reality most people on social assistance in North America are only getting by because they have additional sources of assistance such as the food banks, relatives, under the table jobs, boarders who pretend they aren't living at that address, scrounging, theft, etc. and a fair number of them are actually slowly dying from malnutrition etc. Many more end up homeless because they spend their social assistance funds on food and get booted for non payment of rent.
The problem with providing state support is that inflation is based on what the market will bear. Take taxis - when they wanted to raise the rate for taxis in my city, because of the price of gasoline going up meant that some of them started to operate at a loss, the taxi drivers opposed the price increase - because they knew that their low end customers could not afford to pay it. If rates stayed the same the taxi drivers would go under AND if prices went up they would go under. They raised the taxi fares and it made very little difference because what they gained in higher rates they lost in lost customers.
Tinkering with the economy is like that. Economists have a lot of theories about how to manage the economy but in fact at least half the time what they do doesn't work because theories are only good in theory and there are a LOT of people out there juggling finances, so if there is a way to game the system a huge number of them will find a loophole and screw things up for the economists.
It's not going to be enough to make laws preventing the landlords from raising rents, you'll also have to pass laws preventing taxi drivers from increasing fares, and schools from charging new fees, and grocery stores from increasing the price of food, and... you'd need to have complete price controls on everything to prevent the UBI rapidly become less than livable. And if you do that the increases will be levied under the table, or you'll get a situation like New York in the sixties and seventies where the landlords let their buildings rot and walked away from them because they couldn't pay their property taxes and expenses with rent controlled buildings and poor neighborhoods became food deserts. It wasn't worth investing in real estate because you couldn't make good enough profits, so you pulled your money out if you could and invested elsewhere. It wasn't worth running a business in a poor neighborhood because you couldn't cover expenses doing retail there.
I have complete confidence that the basis of our economic inequality is our political inequality - right now you have powerful groups, like corporations, who have much more power than other groups, like unemployed people, or like graduates with student loan debts. The government and the economy is being steered by the people in power and the people in power are competing to gain more power and steadily gaining more too.
With democracy you say each person has a vote, but the power doesn't lie in voting, it lies in choosing who gets to be a candidate, what issues are addressed and what laws get created. If you only get to choose to vote for someone who will hang you, or for someone who will drown you, you still only get to vote for someone who is going to kill you. I am pretty sure if there is a history of our time centuries from now our votes will look like the bread and circuses that Roman citizens were eligible for - a privilege that did not redistribute power from the actual people that held it to hoi polloi.
I do think that UBI could work - but only if it were being granted in a society with a large surplus and an expanding economy. If the economy were expanding then the UBI could expand with it and keep up. But our political economies are contracting, so government benefits and power and the UBI are going to shrink, while the corporate economies keep expanding and sucking any slack out of the political system, transferring additional power to themselves.
Remember that the old age benefits and social assistance were brought in when the economy was increasing and when they were brought in they were intended to support people at a rate that gave then dignity. UBI, if it comes in, will be the latest socialist pay out, but like the others will be chipped away at until it becomes too low to be liveable, either before any payments are issued, or because it won't keep up with inflation. Our systems could support have a lot of people not working - but it can't do so if massive quantities of money and power are being skimmed from the system but power blocks that aren't interested in supporting UBI. UBI could work if all the big corporations like Amazon and Alibaba and Exxon Mobil were insisting on it. But they are not, so the work and money required to make it viable isn't going to happen.
UBI is a lot like the Aesop's fable of belling the cat. It is a really good idea and would make things much better across the board. But the power doesn't lie with the people who want it, or who would get it. It lies with people who would only be willing to grant it if it gave them additional power to compete with the other oligarchs. That's where the power struggles really lie, and the oligarch power struggles have reached a stage right now where they are spending their money on a hot war in Europe. I can neither see a path that would plausible lead to any North American government issuing a UBI, or one where it would be a livable stipend if they did. There are far too many people who would be able to block it if it didn't make them richer.
posted by Jane the Brown at 5:24 PM on October 17, 2022 [1 favorite]
It frequently happens that the base rate for social assistance of whatever sort is raised by a cost of living increase, say 6%. And the following month right across the board all the low end landlords raise their rent by that exact dollar amount. And since the amount they raise it is only 6% of the already low social assistance benefit, they are usually within legal parameters with the rent increase.
Now UBI is not going to have such a tidy little exactly matching sum. But let's say, hypothetically the social assistance rate for an area is $800 per month. The next question is what will the UBI be? The social assistance rate is supposed to be calculated to be a livable basic income, so theoretically the UBI in the area will be $800 too. Now $800, the standard social assistance rate is usually not a livable amount, and as a result of the fact that there is no contingency built in, people on social assistance are often eligible for additional benefits, such as prescriptions, or food stamps, or a bus pass, or a back to school allowance for parents with school aged kids. But in reality most people on social assistance in North America are only getting by because they have additional sources of assistance such as the food banks, relatives, under the table jobs, boarders who pretend they aren't living at that address, scrounging, theft, etc. and a fair number of them are actually slowly dying from malnutrition etc. Many more end up homeless because they spend their social assistance funds on food and get booted for non payment of rent.
The problem with providing state support is that inflation is based on what the market will bear. Take taxis - when they wanted to raise the rate for taxis in my city, because of the price of gasoline going up meant that some of them started to operate at a loss, the taxi drivers opposed the price increase - because they knew that their low end customers could not afford to pay it. If rates stayed the same the taxi drivers would go under AND if prices went up they would go under. They raised the taxi fares and it made very little difference because what they gained in higher rates they lost in lost customers.
Tinkering with the economy is like that. Economists have a lot of theories about how to manage the economy but in fact at least half the time what they do doesn't work because theories are only good in theory and there are a LOT of people out there juggling finances, so if there is a way to game the system a huge number of them will find a loophole and screw things up for the economists.
It's not going to be enough to make laws preventing the landlords from raising rents, you'll also have to pass laws preventing taxi drivers from increasing fares, and schools from charging new fees, and grocery stores from increasing the price of food, and... you'd need to have complete price controls on everything to prevent the UBI rapidly become less than livable. And if you do that the increases will be levied under the table, or you'll get a situation like New York in the sixties and seventies where the landlords let their buildings rot and walked away from them because they couldn't pay their property taxes and expenses with rent controlled buildings and poor neighborhoods became food deserts. It wasn't worth investing in real estate because you couldn't make good enough profits, so you pulled your money out if you could and invested elsewhere. It wasn't worth running a business in a poor neighborhood because you couldn't cover expenses doing retail there.
I have complete confidence that the basis of our economic inequality is our political inequality - right now you have powerful groups, like corporations, who have much more power than other groups, like unemployed people, or like graduates with student loan debts. The government and the economy is being steered by the people in power and the people in power are competing to gain more power and steadily gaining more too.
With democracy you say each person has a vote, but the power doesn't lie in voting, it lies in choosing who gets to be a candidate, what issues are addressed and what laws get created. If you only get to choose to vote for someone who will hang you, or for someone who will drown you, you still only get to vote for someone who is going to kill you. I am pretty sure if there is a history of our time centuries from now our votes will look like the bread and circuses that Roman citizens were eligible for - a privilege that did not redistribute power from the actual people that held it to hoi polloi.
I do think that UBI could work - but only if it were being granted in a society with a large surplus and an expanding economy. If the economy were expanding then the UBI could expand with it and keep up. But our political economies are contracting, so government benefits and power and the UBI are going to shrink, while the corporate economies keep expanding and sucking any slack out of the political system, transferring additional power to themselves.
Remember that the old age benefits and social assistance were brought in when the economy was increasing and when they were brought in they were intended to support people at a rate that gave then dignity. UBI, if it comes in, will be the latest socialist pay out, but like the others will be chipped away at until it becomes too low to be liveable, either before any payments are issued, or because it won't keep up with inflation. Our systems could support have a lot of people not working - but it can't do so if massive quantities of money and power are being skimmed from the system but power blocks that aren't interested in supporting UBI. UBI could work if all the big corporations like Amazon and Alibaba and Exxon Mobil were insisting on it. But they are not, so the work and money required to make it viable isn't going to happen.
UBI is a lot like the Aesop's fable of belling the cat. It is a really good idea and would make things much better across the board. But the power doesn't lie with the people who want it, or who would get it. It lies with people who would only be willing to grant it if it gave them additional power to compete with the other oligarchs. That's where the power struggles really lie, and the oligarch power struggles have reached a stage right now where they are spending their money on a hot war in Europe. I can neither see a path that would plausible lead to any North American government issuing a UBI, or one where it would be a livable stipend if they did. There are far too many people who would be able to block it if it didn't make them richer.
posted by Jane the Brown at 5:24 PM on October 17, 2022 [1 favorite]
If we go away from housing specifically and to purchasing power more generally, think about it in percentages instead of dollars - if I make $10k a year and get a $25k UBI added, my income is now 350% of what it was. But someone who made $100k before it and now makes $125k has only 125% of what they used to have. And they have 3-4x as much money as I do, as opposed to having 10x as much. So someone who is pricing their goods for broad appeal in the market will see more people now able to buy those goods. Even if the price goes up, they're still trying to sell to my wealthy neighbor too.
And on the "supply" side, if I wanted to rent a room from that wealthy neighbor and I offer him the standard assumption 1/3 of my income, that's now $12k (increasing his income by about 10%). Before if I wanted to rent a room from him, to get that same 10% raise, I would have had to give him my entire $10k annual earnings, not possible. So maybe someone will be interested in me as a roommate now. This is why "income inequality" matters and gets talked about so much. If your year's pay is what I make in six minutes, what incentive do I have to try and serve you / sell to you at all?
So remember, housing and other things aren't monopolies with a single provider where The Landlord gets to implement a sweeping change across the nation. (And when they tend toward monopolies our regulatory system is supposed to step in, even if it's slow - that's why you see articles like that one about the algorithms, is because that's not actually the accepted, legal norm).
posted by Lady Li at 8:34 AM on October 18, 2022
And on the "supply" side, if I wanted to rent a room from that wealthy neighbor and I offer him the standard assumption 1/3 of my income, that's now $12k (increasing his income by about 10%). Before if I wanted to rent a room from him, to get that same 10% raise, I would have had to give him my entire $10k annual earnings, not possible. So maybe someone will be interested in me as a roommate now. This is why "income inequality" matters and gets talked about so much. If your year's pay is what I make in six minutes, what incentive do I have to try and serve you / sell to you at all?
So remember, housing and other things aren't monopolies with a single provider where The Landlord gets to implement a sweeping change across the nation. (And when they tend toward monopolies our regulatory system is supposed to step in, even if it's slow - that's why you see articles like that one about the algorithms, is because that's not actually the accepted, legal norm).
posted by Lady Li at 8:34 AM on October 18, 2022
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posted by saysthis at 6:29 AM on October 17, 2022