This is a very hard problem to solve. The issue is not just the money and wealth itself but the power to control its flow. You can arbitrarily distribute the money but there are so many gatekeepers deep inside of the societal structure who're going to squeeze as much as possible from the policy and they have enough power to do that. For instance, you give 1000 bucks to everyone? Then landlords will increase the rent by 800~900 bucks.
While I still think that UBI can be quite a useful tool to solve poverty problems, this is not a silver bullet and has its own caveats. We still need to understand how those powers are working in practice and handle them one by one. Otherwise, this could be easily repurposed into a tool to reinforce the established power structure.
>Then landlords will increase the rent by 800~900 bucks.
Landlords don't set rents, they are price takers. Now if everyone gets more money and wants to live closer to work, then yes, prices will go up to meet increased demand.
In major tech hubs, find the median salary of a single worker (eg seattle $100k). Divide by four ($25k), that’s roughly the cost of a one bedroom apartment (~$2k/month). Adjust for neighborhood and amenities.
They know their market. They know the max price they can set and fill easily.
Yet in Redmond, which has a median income almost 40% higher than Seattle [1], apartments are cheaper. There's no price-fixing by landlords based on incomes, it's supply and demand. There's less desire to live in Redmond, so an equally sized unit is cheaper despite higher incomes.
> There's no price-fixing by landlords based on incomes, it's supply and demand.
Sorta yea. Realistically traditional Econ 101 concepts don’t always apply to housing. Supply is limited and can’t be increased as much as demand because building housing is quite hard and conversely demand is capped at the household income of people who will live there (eg Medina vs Renton are entirely different markets). Generally, people pay ~25% of their household income on housing (once they leave being low-income). Therefore prices will trend to that value for the given demographics. Because people can out bid each other on purchasing or landlords will charge higher rent prices knowing someone will pay it.
Redmond is wealthier than seattle (as a rich suburb), and I bet the median cost-to-acquire-housing in Redmond is greater than seattle even if the cost of a “750sqft 1br with parking” is cheaper. Being a family town with a good school, people probably want multi bedroom housing, and probably want a yard etc. So people who will live alone with a one bedroom is different from most of Redmond.
Landlords and homeowners compete between themselves for real estate near where jobs are, since there's a limited supply. This causes the market price to purchase a property to adjust to the cost of capital that is equivalent to the value gained by living there. This has a natural upper bound. The market rent is the cost of capital to purchase a property plus some margin to account for the cost of doing business. For example, if moving to an area will increase my salary by X, there's little point in me moving there if my rent will go up by more than X. The same goes for my mortgage payment. Even if I had the cash and could buy mortgage-free, it wouldn't be worth it because I could make more by investing the cash somewhere else.
If UBI is indeed universal and you'll get it regardless of where you live, then the value of "living there" will go down proportionally, because the value of living elsewhere will go up, relatively speaking. Another way of looking at this is that demand to living in expensive areas will go down because it'll be (proportionally) less necessary to live where the jobs are.
> demand to living in expensive areas will go down because it'll be (proportionally) less necessary to live where the jobs are.
Expensive areas are expensive not only because of jobs but for many other reasons, mainly related to entertainment. Even with UBI, NYC will remain far more attractive than middle America because of a better {dating, restaurants, bars, museums, ...} scene.
I don't think people think about rental pricing from first principles. In general, they look around, see what everyone else is charging, maybe nudge it up a bit, and charge that. If they don't get any tenants, they lower the rate until someone leases the apartment.
Small landlords may do that… but how does “everyone else” price?
If you set price to low, you’re leaving money on the table, price too high and you won’t find a tenant. Price high (but not too high), it may take longer to find a tenant (more lost rent), price low and you’ll get lower income tenants (who will be more likely to miss rent, because they’re less likely to be non-salary workers). The rents will “naturally” trend to a rate that is affordable but budget-filling of the desirable demographic -in a big city that’s well paid office workers who move a lot.
Rent absolutely will go up regardless the exact mechanism, but rent and the specific mechanism by which rent rates are set, is just a detail and silly to focus on.
It's just a stand-in for a concept. Replace "rent" with "cost of living".
Their stated point was that the money will be re-absorbed by the same people it was meant to combat, by countless mechanisms.
If the money is meant to empower people currently too disadvantaged, it mostly won't, because the entities in control of things that resulted in some people being squeezed too hard, will still be in control of the same things, and the net result will be that the extra money becomes a no-op number shuffle.
When people spend their money, the money goes to the sellers. But this is hardly a no-op. Yes, when people have more money to spend that's good for the merchants who cater to them, but it's also good for the shoppers because they can buy more stuff. Having spending power means that the merchants are working for you. You can't get that without money.
It's rather weird that people can convince themselves that having more money to spend won't make any difference.
It's more complicated than this. There is rent control and rent stabilization, for example. I'm sure my landlord would LOVE to raise my rent to twice what I'm paying, but they're not legally allowed to. Yes it's weird and anti-free-market and unfair to people that didn't get in early and all that. But that's how it goes! UBI would not raise rent on rent stabilized apartments in NYC.
That just means you are paying below market rent. There is someone willing to pay twice your rent to live where you do.
Rent control creates a first mover advantage where the incumbents have a good deal and everyone else suffers. Whether this is fair depends on your beliefs, but I would rather have healthy turn over to give more people an opportunity to experience an area.
> There is someone willing to pay twice your rent to live where you do.
And as much as that is permitted to happen, the devastation to society increases.
We presently have people entering homelessness with money in the bank. It's unlikely we've hit the possible upper limit on our broad housing catastrophe - but wherever that limit is, we certainly know how to reach it.
If what people say is true and that there is a housing shortage, then yes, landlords will basically extract maximum available cash out of their local market.
This is not true. In a theoretical market it may be true but in a real world market it just is not. People don’t make rational decisions. Prices don’t reflect what “should”happen. Landlords increase rent because they can. No shade on landlords - because they are encouraged in the US to do so. But to pretend like this wont happen is naive.
If I set rent to 3k a month for a old 600 sqft apartment no one will move in. If someone is paying 1.8k for that and I raise the rent to 3k they will move.
Landlords increase the rent to the maximum that people are willing to pay. You can dress up a unit and maybe get a little more but no one will pay you 5k a month for a 600 sqft unit last updated in the 80s. If they will then you have a housing shortage and you need to let landlords and builders build.
> Landlords increase the rent to the maximum that people are willing to pay.
Yes, and?
And, if you institute a UBI of $1000/month, the maximum that people are willing (and able) to pay suddenly increases by around $1000/month. And since landlords are mostly not complete idiots, they will recognize this and increase rents by approximately $1000/month.
Which was the point of the poster you originally replied to.
The only way that won't happen is if another, cheaper, alternative exists (like buying a place to live instead of renting). Except that, wouldn't you know it, people selling houses have also realized that they can raise prices by the amount equivalent to a $1000/month increase in mortgage payments.
>if you institute a UBI of $1000/month, the maximum that people are willing (and able) to pay suddenly increases by around $1000/month
Most people are not willing to spend all of their excess money on rent. It will increase demand in desirable areas but landlords do not get to just raise rents because they want more money.
Your cause and effect are mixed up. Home owners don't do a calculation macro conditions and interest rates when setting a price. They look at comps, list, then go "wow, we got 3 bids over asking". They accept the highest one. The next sellers see their sale and set prices accordingly.
It's almost like it wouldn't be feasible in isolation. One would first have to remove all the gatekeepers who control the absolute basic necessities like food, shelter and healthcare first. Otherwise the general population will just be extorted out of their basic income.
The article says "conservative support for UBI rests on an approach that would increase poverty, rather than reduce it", so maybe the problem is the conservative approach and not UBI?
The problem is math; there are ~307 million citizens, around 75% of those over the age of 18, plus 23 million non-citizen residents of the US. Even taking a pretty conservative approach of only paying $1K/mo UBI to the citizens over the age of 18, that's 307M * .75 * $1K * 12 or $2.75T. US Federal tax revenue for 2021 was just over $4T.
So, even with a fairly paltry UBI, you're talking about UBI representing an increase of taxes of almost 70% of total federal taxes.
Make the UBI $1500/mo per adult citizen and UBI costs more than every dollar of federal tax received currently.
Pay the $1K UBI to every resident of the US and UBI represents basically 100% of current federal tax receipts.
It's interesting to me, because it doesn't seem that hard or wrong to tax stagnant dollars. And I suspect it would solve a lot of the inflation woes that might happen with UBI, as well as a lot of the US economic woes.
Every time we look at fixing an issue like this, it seems like we're only looking at the half of the problem that involves creating the benefit, because paying for it is unpopular. But wealth accrual in this economy is a net drag. The tax side of trickle-down means that we're only ever working with a trickle to power major public benefits that could otherwise consistently run our economy, and provide robustness where we have a lot of weakness.
You could pay for UBI by heavily taxing stock portfolios of the richest people. + 10% tax on the richest 1% of stock portfolios would raise about 2.3T (source CNBC). It would also take money from people who "can't spend it all" (something Bezos has literally claimed, he has trouble with), and give it to the 300M people who actually have something to spend it on, as evidenced by the huge boom in the economy created by the stimulus package.
It's not that you can't find the money to tax this, it's that no one has the political will to tax anything.
Yeah, cause GDP will definitely just stop growing once you've extracted the $4T. Taxes disappear into a hole you can never get them out of once they've been spent. The stimulus money has famously halted the economy in its tracks.
The point I'm making is that the problem is there's a lot of stagnant dollars providing no value to us, that you could readily reinvest in something like this.
Also, before someone brings up inflation in response, I will point out the reason inflation is rampant, is we're not pulling the money out of the economy at the same rate we're putting it in...
I think the arguments that a federal wealth tax would be unconstitutional are far stronger than the (IMO, fairly tortured logic) arguments that say it would be constitutional.
In any case, I’d expect them to be strong enough to cause a substantial delay while that gets figured out (and even longer/possibly never if an amendment is needed).
If you earn $75,000 privately and pay, say $20,000 in tax and then the government institutes a UBI of $15,000 and increases your taxes to $35,000, the only change you are likely to see is an increase in competition for some types of goods and services.
It's really odd to stand on the pretense that the UBI wouldn't (effectively anyway) be taxed.
Of course it would be taxed. The math is laid out because many people seem to think this is couch cushion money.
Today, about 57% of households pay no net federal individual income tax. That figure would only increase with UBI implemented as a negative income tax.
Maybe it seems reasonable to some for the median household to receive money from the feds on top of the services they get today for free. That doesn’t seem stable and sustainable to me, neither economically nor politically.
> The article says "conservative support for UBI rests on an approach that would increase poverty, rather than reduce it", so maybe the problem is the conservative approach and not UBI?
Perhaps this would be a more convincing argument if the article proposed some way to pay for UBI other than handwaving it away through more taxation.
For context: you could take literally every penny doled out to the military industrial complex and throw it into UBI and it would barely put a dent in that overall cost.
This is why rent control is actually a good thing and not a bad thing. Rent control allows you to set the rate of acceptible rent increases for a given tenant. This means you can peg rent increases to the rate of wage increases, and prevent gouging. Couple it with zoning reforms and there would be no need to gouge anything; hard to gouge for water bottles someplace unless there is a lack of them available on the shelves, for example, and housing is no different. Zoning is the real source of a lack of supply in cities; these cities are built to the limits of zoned capacity even with rent control policies in effect, so that argument that rent control stifles development goes out the window in reality, since we see that every lot in a supply constrained city is typically already developed to the limits of what is allowed by these zoning laws, even if they are rent controlled.
If you want to avoid ubi being eaten to these sources, you need to acknowledge what mechanisms are being used to gouge people of their needs, and ameliorate them by allowing new entrants to enter the market currently dominated by existing players (in this case existing landlords, who would prefer to have their prices march up and up without having to invest in redevelopment to add more rentable units on their lot, than to have more competition and pressure to keep prices at a minimum level). Just like with water during a hurricane, the government can use laws like rent control to prevent this gouging, and reforms like increasing the zoned capacity of a given area to meet the number of workers in the given area to incentivize "delivering more waterbottles" so to speak as the only way to increase the quarterly profit of your lot (versus leaving it relatively undeveloped compared to demand and taking advantage of the resulting supply dearth you've artificially created).
Rent control suppresses new housing creation by reducing returns on investment. Zoning is only one half of the equation: you also need developers willing to build housing. Price controls limiting rental rates reduce the return developers would make [1], thus disincentivizing new housing construction.
1. Arguing that rent control doesn't suppress development because it only affects rent increases is misleading. Developers are operating on a decades-long investment horizon, so the fact that long-term renters are going to be underpaying within a few years is definitely a factor taken into account.
If you tie rent increases to COL changes YoY then rent should stay relatively indexed to wages and other expenses, while preventing landlords from manipulating occupancy at the expense of renters.
I would have happily rented for forever if we had been able to get a great apartment that was rent stabilized and had good tenant protections. It was just the unpredictability of rentals in NYC that drove us to buy.
If you tie rent increases to the prices of other goods it still results in suppressed returns on development. If there's a housing shortage and rental prices rise faster than energy, food, etc. then people will be paying less than market rate (read: suppressed returns on development). Like in San Francisco: AFAIK food, energy, and other staples did not rise significantly faster than other areas. But housing shortages led to significant rent increases.
The only way rent control doesn't suppress returns on development is if the maximum rent increases are higher than what the rental increases would be absent rent control.
The thing is, that assumption that without rent controls, developers can finance more money on builds hinges on the fact that supply is constrained, and will continue to be constrained in the future such that rents will march past average wages. At which point you have to wonder who is being served by laws set up like that? Certainly not the city, which has a tacit interest in housing all the workers that generate its economic activity within its own borders just for tax base reasons to cover the infrastructure these workers use to work in said city. Certainly not the workers of the city, who would like to live a reasonable distance from their job for a reasonable proportion of their net pay. The only real benefactor from such a paradigm are those that stand to make profit hand over fist from this status quo, and these people are often not the central cogs of the regional economy that makes the place such a place to invest in the first place. They are more like a parasitic loss on the system versus serving any mutually beneficial function to the system. These beneficiaries may live outside of the system entirely, and basically serve to extract wages from the system which aren't replaced much like any other extractive industry.
Now, there is a solid argument that apartments have gotten too expensive due to regulation. Look at any apartment building and what do you often see? Its cladded in tiny 3 feet by 8 feet balconies that can scarcely hold a cafe table, it often has some big central mostly useless courtyard like area within the complex itself to check a box for some outdoor space requirement, and it has a parking garage that extends 100 feet into the earth. All of these things are also brought on by regulation that demands the developer to build these things if they are to see the build approved. These can also all be nixed, and in many cases they have been used pretty much to just serve as a vehicle for graft for city officials. Put a bag of popcorn in your microwave and then read about Jose Huizar if you want a brief of how these sorts of things function in large american cities.
That being said there is no rational reason to support advancing rents past wages. Why would there be? Its the snake eating itself; the race to the bottom is that you end up with only the high income sliver of your regional economy of workers living where the job activity takes place, which is pretty wholly terrible for the environment and also deprives most of the opportunities that present themselves from being able to live near a major job center. We should be doing anything we can to prevent this race to the bottom, just for our own climates sake if the mere wellbeing of your fellow worker isn't enough.
The city absolutely is being served. If there's no money to be made building housing, then nobody is going to build housing and there will be a shortage. The beneficiaries aren't just the developers making a profit: it's also the renters paying normal rents instead of suffering from a housing shortage.
There's also the political ramifications of rent control: people paying far below market rates have little incentive to support the construction of additional housing, and more frequently try to shut down developments. One of the most ardent anti-development activists in San Francisco turned out to be paying $740 a month in an apartment estimated to rent for $4,500 at market rate. Get rid of price controls, and I bet this person would stop being a NIMBY overnight.
> That being said there is no rational reason to support advancing rents past wages. Why would there be?
To spur the construction of new housing! If there's a food shortage, the last thing you want to do is cap the price of bread. No, you let the prices rise so that more farmers grow food. If people are struggling to buy food maybe subsidize it to make it affordable. If the price of food is capped, then there's nothing to drive greater food production.
The same dynamic exists with rent control: cap the price of housing and people end up paying less than market rate. Developers realize they won't be making a favorable return on investment when they build in a rent controlled city so they move elsewhere.
How? All it does is set the rate of rent increase to e.g. 4% a year, it does nothing about the zoning of the lot. For example, people always cite something like someone in greenwich village getting a deal on an apartment, and that is somehow constraining development, while ignoring that the neighborhood of greenwich village is built to over 90% of its zoned capacity, and you cant add very many more units there even if you could get away with renting them for a million dollars a month and had permission to level whatever building was on the lot previously. Plenty of cities actually saw significant downsizing to zoned capcity since the 1960s, when things were certainly more affordable by most accounts. Sometimes by factors of 4 or more fold reductions in zoned capacity when you account for population size. The city of LA itself for example is built to over 90% of its zoned capacity. 2.
1. Some people will naturally want to move out of their rent-controlled apartment, for example to be closer to a new job or to get more space for a newborn. Those people are disincentivized to move because rent control means they are currently paying below-market rent.
Incidentally, that also increases traffic congestion because nobody wants to move across town to be closer to work. So you commute to where I live and I commute to where you live, instead of us both living within walking distance of work.
2. Rent control normally does not include an adjustment for inflation. And, when it does, the rule is usually "rent can increase by x% of rent or y% of CPI, whichever is lower ". That means that over decades, rent falls in real-dollar terms.
Since potential landlords can do math (they have that technology) they can see that the ROI of an apartment building (measured in decades) is lower in places with rent control. That disincentivizes them to buying or building apartments.
Lastly, it seems like you're really trying to hang your hat on zoned capacity. The thing is that zoning can change. If the ROI looks right, landlords will lobby the city for a zoning variance to increase capacity. If it doesn't, they won't.
This is why I favor a libertarian Marxist analysis of economic change over UBI strategies. What I mean by libertarian Marxism is essentially what Richard Wolff advocates - that instead of an economy comprised primarily of top-down managed firms, we transition to an economy of worker owned cooperatives (still within a free market). This moves real economic decision making power to a broad base of the population rather than in minority hands. This fulfills the goal of worker ownership of the means of production in a fully voluntary system.
The problem with UBI is that economic decision making stays within the hands of a small minority, who then tilt the whole economy in their favor. This is why worker ownership of the means of production (or as I like to say, community ownership of the means of production) is so important. What’s important to understand is that this is a mechanistic choice for how to run an economy. We can choose to do this voluntary because we recognize the value this arrangement offers to most people. It does not need to be done by force as attempted by autocrats in the 20th century. In any case, it requires less force than UBI!
No, authoritarianism has lead to mass famine and death. Marxism is just a way to operate an economy. If you implement changes to an economy by force, you’re probably going to hurt people. But we can still make voluntary changes to our world based on things we think are a good idea. Like advocating for and participating in worker cooperatives.
And being a purely voluntary concept I’m suggesting, you don’t really need “a country” to do this. You could have just some groups within a country do this and they would see some benefits.
You're getting downvoted, but look at what happened over and over all over central and South America. I'm not saying that you have to be capitalistic as the USA, but social democracy seems like a reasonable solution in the middle.
In an ideal world low earners would spend UBI money and it would circulate in the local/state/national economy in the right proportions. In reality our capitalist system has near-perfected the art of upward movement of money. We saw this happen during COVID, and there's no reason large scale UBI would be any different.
Iirc there was a pilot done in South Korea where they gave citizens of a town a kind of UBI but it was only spendable on local stores. So you couldn't use it to buy online on amazon for example.
I haven't followed up but you're right in pointing out this problem of money syphoning.
What about where the local shopkeeper spends it? Unless that money permanently carries around with it a "local only" bit, as soon as it is spent once, it's likely eventually getting sucked out to Amazon, Walmart or one of the world's other "wealth gravitational singularities".
While I still think that UBI can be quite a useful tool to solve poverty problems, this is not a silver bullet and has its own caveats. We still need to understand how those powers are working in practice and handle them one by one. Otherwise, this could be easily repurposed into a tool to reinforce the established power structure.