| UBI will lower rent. The most common criticism of UBI is that landlords will raise their prices to
capture all of the gains. I disagree, I believe that a properly implemented UBI
will lower rent prices. Rent rises quickly because both supply and demand are inelastic and renters are
relatively price-insensitive. Any market with relatively fixed supply and demand
experiences large and quick price changes. The most prominent example is oil --
a small change in supply causes a large change in price because demand is
inelastic; people don't stop buying gas just because the price went up. But oil
experiences quick price changes in both directions. Rent only seems to increase. Housing is a necessity. If there are more families needing housing than there
are houses, families will pay as much as they are able to ensure they're not the
ones without housing. So when supply exceeds demand, price rises rapidly. The
converse is not true. Most landlords are not as desparate to rent their
dwellings. When supply exceeds demand they have the ability to say no, they can
and do choose to leave the dwelling empty rather than accept a lower price. But prices do eventually come down when supply exceeds demand. For example, the
rent for 1 bedroom apartments in Toronto is down 10% in the last 12 months. If implemented poorly UBI could definitely be inflationary. If UBI is paid for
by money printing rather than through taxes it will be inflationary. But if it
doesn't increase the money supply and is constant across the country UBI will
lower rents rather than raising them. Why? Becuase it makes demand elastic. Right now people are moving to the
expensive cities because that's where the jobs are. They don't really have a
choice. UBI gives them a choice. You can move to San Francisco and work 2 jobs
to be able to afford rent, or you can move to West Virginia and pay your rent
out of UBI and not need a job. Some people are going to do that. Not many, but
likely enough. There's a saying. "100 supply, 101 demand; price goes up. 100 supply, 99 demand,
price goes down". Small changes on the margin can have a large impact on prices. Keep in mind that any UBI that is fully tax supported is going to necessarily be
very miserly. US average income if $40K. So if you set tax rates at 100% and
spent every penny on UBI then UBI could be $40K. Obviously neither assumption is
going to be true. Tax rates will have to be significantly less than 100%, and
we'll spend money on our military, etc. A UBI of more than $1000/month seems
highly unlikely without money printing. And there are basically only three ways
you can live on $1000/month: Move to a low cost of living region like West
Virgina, live on the street or live in highly shared accomodation. All three of
these scenarios reduce housing demand in expensive cities rather than lower it. |
Probably not the industrious and productive kind I'm sure.