Yeah it’s like UBI people believe rent prices are set by something other than the maximum that the landlord can get for it. If you give people ability to pay greater rent, as say the advent of the motorized plow did, then rent goes up. Simple as that.
By this logic why the current rents are not even higher? Why do people still have any money left for iphones, netflix etc.? Why is it not all taken up by rent?
I suspect rents rise to where it is just about tolerable for most people in any particular renting cohort, where the cohort is matched to the type & quality of housing.
When it's not tolerable, people leave the cohort and move down a grade, to lower quality and therefore cheaper housing.
Obviously it's not tolerable if you don't have enough money left for food & essential bills.
Not sure why iPhone & Netflix come into this, because they are so extraordinarily cheap compared with rent, food and bills. But of course a phone is essential, and an iPhone very useful, cheap (on contract) and arguably essential these days - for some people it's their only access to the internet. People would not find it tolerable if they couldn't afford a few nice, cheap things, such as Netflix.
When you account for rent, food, bills and a few nice things, as far as I can tell that does take up all the income for many. Have you noticed that a lot of people aren't saving anything?
Of those who are saving, mostly they are saving for a deposit on a mortgage, and/or a pension.
Because people want to buy those things badly enough that they will spend less on housing, to a point, to afford them.
Theoretically a nationwide increase in discretionary income could create new classes of goods that would be desired enough to compete with rent and phones. Or it might not and people would just spend more on rent and phones up to their new limit. Phones would probably move upmarket to capture this revenue as they are essentially globally competitive. Rent would not as much due to the nature of housing supply and the effort of moving cities.
Because you can often get iPhones for <$100 or even free if you get one a couple generations old and sign a 2-year contract. Why do people still use "iPhones" as some sort of litmus test to judge if someone is poor?
Because housing is inelastic and in short supply -- everybody needs it and if the price increases they will still pay for it.
If you increase the housing supply, the price falls. Increase it to a point where there are some vacancies and suddenly landlords don't have as much bargaining power to take your entire UBI. At some point a landlord is going to say
"well better to fill it for $900/month rather than let it sit empty".
I think a huge part of UBI is making the economics of the essential things in life work out so normal people have the power when it comes to basic needs.
Personally, I really hate this comment, for several reasons.
First, let's consider the price of the rent. Assume for a moment that somebody manages to fix all mental health problems, alcoholism and so on, and that magically everyone manages to find a good job that pays reasonably well. This is supposedly the dream land of the pure capitalists: everyone works and is productive and so no handouts are received. Well, what would you suppose happens to the rent in this situation? If everyone is able to pay, then rents would go up, wouldn't they? So the difference between UBI and this is only that in one case people don't necessarily have to work, while in the latter case they have to spend 8+ of their lives doing stuff they may not like.
What this means is that your main point is simply that you don't want people to have money to pay for housing, because that may make prices go up for you. You are literally advocating that some people must be homeless so that life for us is easier.
Secondly, the rent argument consistently ignores the fact that if you don't have to work, you can go live wherever you want. One could go live in Alaska and buy 1km2 of land for 10$ because who gives a shit? construct their own igloo or something and then live there forever. This would additionally free them up to spend a larger part of UBI on other products. Instead there is this weird assumption that people will forever cluster in SF or other highly populated centers, because apparently humans are ants and like to breathe pollution.
You’re articulating clearly why even solving all underlying causes of homelessness wouldn’t actually cure homelessness. Why don’t you believe your own argument?
In any case, while that is the obvious conclusion (as you’ve stated), I never took the position that we merely need to fix mental health etc. I am not saying UBI will work but will make prices go up so I don’t like it.
I am saying that UBI won’t work, it will in fact make inequality worse, AND there’s a solution that will work. It’s the LVT. Once we have LVT, then we could do UBI and the upside would not get absorbed by landlords.
It’s odd to me that you’re claiming that I’m being dismissive of poor folks but you’re literally advocating moving to an igloo in Alaska as a solution?
I apologize if using hyperboles makes my point less clear. I'm not literally advocating Alaska, I'm trying to make the point that cities as we currently know them only exist because they are the most efficient solution when the population mostly has to work in the same location. Once you remove this constraint, it's much more viable to have smaller and more distributed population centers, without necessarily resorting to living alone in Alaska. This would still significantly reduce rents, and even better allows competition between distant locations which wouldn't otherwise be competing on prices.
For the other point, UBI as I know it must be financed by some sort of increased taxation of the rich, it is not the government blindly printing money and distributing it. I don't know whether that taxation should be LVT or something else, I'm simply talking about why the argument that UBI doesn't work due to rent is, in my opinion, incorrect.
If we accept that a feature of cities is people want to live in them, and will compete for that, therefore UBI won't help people live in cities.
How does LVT help poorer people live in cities? The competition for clustered housing continues, that's a fundamental cause.
Richer people still have an advantage over poorer people in economic competition. Instead of people renting and landlords scooping up all the UBI, with LVT you have people competing to buy housing and LVT scooping up all that people can obtain (whether it's UBI, earnings or something else).
Poorer people don't have much luck buying housing in the first place, because of mortgage gatekeeping, even when the actual cost of purchase (mortgage payments) is significantly lower then renting. Even when they do, they pay more for the same level of housing in the end (mortgage interest).
So a switch to a city economy where housing is primarily based around purchases would seem to be not so good for poorer people trying to live there, unless something can be done about access to long-term credit.
1) Public investments such as subways yield increases to public coffers (today, the landlords who happen to own land near a new subway station get a windfall off the city’s billions of dollars of investment). This would incentivize public investment.
2) Land speculation goes away, and development is strongly incentivized, so more units come online and push prices down.
3) Both of the above improvements, as well as private investments made due to public/communal value (such as HQ2 not being built in the middle of nowhere), would funnel huge amounts of money to public coffers. We as a democratic society can decide if we want service workers living in our cities (I reckon anyone who lives in reality does want this) and have the resources to fund making that possible. Things like functioning transit systems go a long, long way.
Land tax is a better then income tax, because it is more efficient. UBI is better then 100 different need based programs because it is more efficient. But government/politicians do not value efficiency, they value bureaucracy. So they will stand in the way of anything better. Clearly what we need is a UBG, Universal Bureaucrat Guillotine.
> How does LVT help poorer people live in cities? The competition for clustered housing continues, that's a fundamental cause.
It means there are better incentives to build denser housing (redeveloping doesn't increase your property taxes, but as your area gets more desirable your land value tax goes up whether you redevelop or not) and public transit (because the city can fund it off the land value increases). So there's a bigger supply of clustered housing.
> Poorer people don't have much luck buying housing in the first place, because of mortgage gatekeeping, even when the actual cost of purchase (mortgage payments) is significantly lower then renting. Even when they do, they pay more for the same level of housing in the end (mortgage interest).
LVT helps a lot with that as well: property becomes less good as an investment, and you don't get to pay lower property taxes just because your bought a while ago.
> If we accept that a feature of cities is people want to live in them, and will compete for that, therefore UBI won't help people live in cities.
It depends on why people want to live in cities. The people who are living in cities mostly for the vibrant community will probably want to stay there. The people who are living in cities because they can't get a job outside the city will no longer have that constraint, and some of those people will move away. Not everyone has to move away for competition to decrease.
I think you are overestimating the ease of people moving from one place to another. While job may be a primary reason people live in the cities, there are other important reasons like access to entertainment, shops, being close to other friends who leave nearby etc. It's not as simple as saying "oh, I could spare 500$ a month by moving in the middle of nowhere, let's do it". Not everybody wants to live in suburban/rural areas and spend most of his time at home.
> oh, I could spare 500$ a month by moving in the middle of nowhere, let's do it
For $500/mo sure. But if it's like people say and landlords try to raise rent $2k/mo like people are saying, then yes people would definitely move.
Also you could easily save $500/mo right now by moving from a big city to somewhere small. Right now, without UBI being a thing. The rent difference under a hypothetical UBI rent increase would be far more than $500/mo.
You think suburban people stay home all the time? What sort of overgeneralization is that? Suburbs = guaranteed vehicle = travel not just mandatory for commuting, but at will, as desired.
If a city in the US existed where everyone magically got their problems fixed, I imaging it would be seen as a desirable place to live, so no wonder the rents go up.
Rent is an auction, so there is a dynamic/negation about living in a place. It's not true that rents go up if "everyone is able to pay" - only if "everyone is able willing to pay"; where are competing cities with lower rents in this example?
Increasing the supply of a good or service will only push the price down when enough of the demand has been satisfied. If the demand far outweighs the supply you're not going to see the price budge for a long long time.
This is basic Econ 101, not Nobel prize territory.
That's only in a dysfunctional market (as housing is in the US). The solution is to fix the housing market by disabling NIMBYism and other such things that cause the housing market to be wholly dysfunctional.
But yes, we should probably fix that before we implement UBI.
I reckon if you fix that, with say the LVT proposed by Henry George in SF during a similar explosion in wealth (and accompanying inequality), you’ll find UBI likely unnecessary. If it is still necessary, you’ll have overflowing public coffers to pay it out with, AND it won’t be eaten by landlords.
Somewhere like SF, a land value tax would simply be another incentive to developers / landlords to build more units. The problem is not caused by a lack of incentives, as evidenced by the sky-high rents - landlords already have huge incentives to build more houses. Why aren't they? I would have to guess, restrictive planning laws are limiting the supply of new housing.
Speculation affects housing prices only because of development restrictions. Because only a small fraction of land can legally be developed, it's possible to corner the market for new development. If all property can be developed, there would be orders of magnitude more competitors in the development space, and impossible for an individual or cartel to control.
You have land and are choosing not to utilize it (rent it out or sell it) in the belief that you will get a higher price for that same land tomorrow.
Today, your tax liability is tiny when you do this. This incentivizes landlords in hot markets to keep their land off the market, thus making the market hotter, this further incentivizing speculation, etc.
This is why you see empty storefronts or empty lots in incredibly expensive areas. The owner can sustain the cash flow loss today in exchange for higher prices tomorrow.
LVT would mean your tax burden is the same (moderate to high) whether you rent it out or do not rent it out, thus making it infeasible to sit and wait for a higher price tomorrow. This would bring more units onto the market and more efficient uses, thus bringing prices down.
Since LVT is often proposed as replacing other forms of taxation (or at least dramatically reducing them), the cost of actually building a dwelling or storefront also goes down — thus further incentivizing non-speculative behavior.
Indeed! A few points just so people who haven’t heard of LVT before don’t walk with easily addressed misconceptions:
1. The government today assesses land value. It also must assess the value of far, far more nebulous things that can be hidden, transfigured, created/destroyed, or moved offshore. Yes more importance would be tied to this singular assessment, but this assessment is singularly easy to assess!
2. The price/value itself would be set by the market. The assessment of that value, of course, would be by the government and you are correct there is risk of differential here (though mitigated by point 1)
3. Lastly, because land cannot be created, destroyed, or moved, a tax upon it is uniquely unable to either incur inefficiencies (deadweight loss) or to be passed onto tenants/consumers. This is contrast to every other form of taxation, which incur inefficiencies then get passed onto the consumer in the form of price increases anyway.
> This is why you see empty storefronts or empty lots in incredibly expensive areas.
The reason why the speculator leaves the storefronts or lots empty is that putting them to use right now would prevent them from being used for something even more valuable in the future. If they could use the property for something productive now without impacting the expected future use they would happily do so and collect the extra income. Coercing them into putting the property to use immediately, via LVT or zoning rules or whatever, is thus inefficient and economically destructive. The speculation serves a useful purpose.
Wrong. The "productive" activity for land holders under system without LVT is preventing others from utilizing it. Without LVT you only achieve massive resource underutilization and favoritism of the first who grabbed it.
If the landowners aren't using the land, and they're not letting anyone else use it, then no one is making any money–least of all the landowners, who also have an ongoing opportunity cost due to the capital they've tied up in the land itself. That's hardly productive. Or rationale. There is no profit in leaving land idle when it could be put to productive use without impairing its future earning potential. Are you claiming that landowners would maliciously prevent the land from being used, at their own expense? Please be specific.
Yes there are landlords who hold land out of use because they know there are or will be others who will eventually want to use it.
There is very clear profit in buying land for cheap and sitting on it until somebody wants it. Land doesn't depreciate unlike buildings. Building something on that land is often more risky for landowners whose business is pure speculation because at sell time the building will have to be torn down by the next user.
This is consistently evident in real world. It might not be in economic theories and textbooks which are designed only for utopia-land.
It really sounds like you're agreeing with me in every sense that matters. You just fail to see the downside of the alternative without speculation where someone buys the land for cheap, does something correspondingly low-value with it without regard for its future potential, and then when somebody else finally does want it for a more valuable use we either can't use it that way or have to tear down what the first user built (which is doubly wasteful when it could have simply been built somewhere else in the first place) and start over.
I honestly don't understand your point much. But let me add this about speculation and land holding for the next user.
There is zero need for a private owner to hold it. The land will not disappear, it will always be there. Government on behalf of the community can hold it just as well without the incentive of preventing others of using it.
This makes land different from other goods where if there were no speculators (dealers who hold inventory) the market would dry up (stocks, bonds, used cars).
Land is in this regard more similar to concert tickets. There are speculators who acquire this limited commodity but their profit stems from preventing others getting them and selling it to them at a later date at incresead price.
Society looks at this type of business as highly unethical.
> The land will not disappear, it will always be there.
The land might not disappear, but it can very easily be rendered unfit for purpose through misuse or neglect.
Let's put this in concrete terms. Say we have a plot of land which is suitable for various kinds of development. We have a prospective buyer who is looking to build a house. They like this property the best but there are several other suitable options; let's say they'd be willing to pay $25k, but not $30k, to acquire this land as the site for their home. The home will be worth perhaps $250k (not counting the land itself) with an expected lifetime of at least a century with proper maintenance, and effectively can't be moved once build.
Development trends in this area suggest that in perhaps ten years' time there will be demand for some sort of commercial development—office space, retail, services, whatever. They aren't here yet, but if trends continue then 10 years from now someone would be willing to pay up to $100k for this piece of land. (The other sites that the first buyer was considering for their home would not be suitable for this purpose.) However, they're not going to pay $250k extra for a house that they're just going to have to tear down to make room, even if the owner of that house were willing to uproot their family and move somewhere else.
Without speculation there is no reason not to sell the property to the first buyer for $25-30k and let them build their house. However, this represents an economic loss of at least $70k ten years later (the $100k value to the future developer minus the $30k maximum value to the residential buyer) since the land is no longer available at that time for the commercial development. To make it available at that point would cost around $250k just to offset the value of the house, plus the cost of tearing it down, never mind the hassle of moving the family.
With speculation, there is someone bidding say $75k for the property and the residential buyer picks one of the other available properties instead—perhaps not their first choice, but a good enough alternative. The speculator limits the use of the property to such things as can easily be removed in ten years to make way for the anticipated commercial use. Perhaps that means leaving it empty, though it could also be turned into a park, short-lease retail space or transient housing, something that could easily be cleared up to make room when the future demand materializes. Then, if all goes well and they predicted the market correctly, they sell the vacant property for $100k and make their well-deserved profit.
Of course, it may not all go well, in which case they'll be forced to take a loss. Speculation only pays when you make the right predictions.
> Government on behalf of the community can hold it just as well without the incentive of preventing others of using it.
If government correctly anticipates that the land will have more value in the future, they can act like a private owner and buy the land and hold it until that use materializes. Where this breaks down is that the government isn't risking their own capital in the process; if they are wrong and the value of the land decreases instead it's not the government that pays the price, but rather the public. Which means they have less incentive than a private owner to accurately predict the future value of the property, and are more likely to lose money on average. When they do lose they don't go bankrupt; they just take more money from the public via taxes. This is merely an inefficient, socialized, and corruption-prone version of private speculation fueled by public funds.
> Land is in fixed supply and everyone needs land to work, sleep, and exist upon.
For those who are convinced supply&demand doesn't work for dwellings, buy a rental and charge 10x the market rate. See how that goes. This applies to any business. For example, try selling something on Amazon/Ebay/Etsy/Craigslist. You can charge whatever you like for it. Whether someone will buy it is another thing entirely.
Everyone needs food, too, but ironically it's the unneeded food (like Starbucks) that's expensive.
Today how that goes is you get huge tax cuts for not making money and keeping valuable resources off the market.
How that should go is you get taxed at the same rate as if you had set it at a price it could be rented at, therefore encouraging you to set your price correctly.
That’s the LVT, that’s basically the entire thing.
You have to think of it in a deeper context than it being binary. It has very similar properties to oil. It's also fixed, but technology has done some phenomenal things to extract more of it with greater efficiency. The same is true for land and housing. UBI, self driving cars, and a greater shift away from working in offices are all going to change how we live and the type of land we will want to live on.
I don't think land is fixed in supply. We can build up and down and in the far future, into space. Either way, we are seemingly far from land being the bottleneck at the moment.
So you're saying that it's hypothetically everyone then? I say hypothetically because the U.S. is only partially a free market (i.e., not a free market), and so that makes any appeal to the "free market" hold little water.
In what way is the increasing ratio of rent to income working for renters?
The government is a monopolist land owner that hands out new land at prices designed to please existing private land owners and lobbyists. This is as far removed from a free market as an absolutist monarchy.
Of course it is a fact, it is one of the most basic laws of nature. It can be observed in interactions of other biological species not only ours. It would still hold if there were no humans. Claiming otherwise is like denying gravity.
A model working and producing a personally.desired outcome are two separate things.
The assumption of a labor shortage because of low nominal unemployment is incorrect - the gig economy is thin margin as it is even with poor pay. It utilizes the previously "idle" labor in a marginal business model but without sufficient demand in other sectors it only provides a low floor.
You are citing a political opinion from a newspaper to prove somehow supply and demand is not a natural law. What is next, an article in Astrology Today arguing 1 + 1 != 2.
"the maximum that the landlord can get for it" is a function of (approximately the minimum of) [1] the amount of money the tenant earns and [2] the price of the tenant's alternatives.
Just because [1] increases, doesn't necessarily mean [2] does.
There is a simpler model that works very well across the whole world. Rent is tied to the price of real estate, which is tied to the purchasing power of the average person living in the area. At some point it's not even worth for the renters to rent out and keep themselves outside the reach of rent controls because their property simply goes up in value and they can take loans against it. As banks expand credit at low risk premium, now to everybody thanks to the new income from UBI prices will only go up. Bank lending drives prices in the end and income and rates are the key factors.
Or just allow developers to build more housing, preferably high density.
The problem with the high cost of housing in markets like San Francisco, is the wealthy capitalists owing real estate create regulations preventing any new housing from being developed.
