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.
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.
And Netflix is $9/month. C'mon now.
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 $900/month rather than let it sit empty".
I think a huge part of UBI is making the economics of the essential things in life work out so normal people have the power when it comes to basic needs.
First, let's consider the price of the rent. Assume for a moment that somebody manages to fix all mental health problems, alcoholism and so on, and that magically everyone manages to find a good job that pays reasonably well. This is supposedly the dream land of the pure capitalists: everyone works and is productive and so no handouts are received. Well, what would you suppose happens to the rent in this situation? If everyone is able to pay, then rents would go up, wouldn't they? So the difference between UBI and this is only that in one case people don't necessarily have to work, while in the latter case they have to spend 8+ of their lives doing stuff they may not like.
What this means is that your main point is simply that you don't want people to have money to pay for housing, because that may make prices go up for you. You are literally advocating that some people must be homeless so that life for us is easier.
Secondly, the rent argument consistently ignores the fact that if you don't have to work, you can go live wherever you want. One could go live in Alaska and buy 1km2 of land for 10$ 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.
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?
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.
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.
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.
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.
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?
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.
That would be contrary to about 300 years of economic theory, so if you can prove it there's probably a Nobel Prize in it for you.
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.
But yes, we should probably fix that before we implement UBI.
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.
My only issue is that you end up making the govt more of an arbiter of what "value" is than it already is, which can end up causing issues.
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.
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.
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.
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 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.
Actually, you need water more than food. Why isn't fresh water $1000/gallon? Why do we have discretionary income at all?
Neither UBI nor any other policy changes that.
Housing costs in expensive markets are set primarily by land values and not by the value of the capital/building upon the land.
Yes you can make a dent in the problem it by zoning for more units, but you cannot zone more land into existence in high value areas.
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.
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.
Nobody pays income tax if they aren't making money. That's why they're called "income" taxes.
If you work in an expensive city, pay $2000 for one room, good luck finding a room for $40.
It is precisely the problem that you cannot opt out of the housing market, at least when you need a calm and safe environment to think.
Even when you don't, it is probably illegal to set up a tent somewhere, and legal camping sites are pretty expensive and horrible, too.
Density of land use isn't fixed. We can build in three dimensions.
Also there's tons of land that's hardly used at all in the form of golf courses. We should build cheap housing on them.
Works for whom?
In what way is the increasing ratio of rent to income working for renters?
Where those in power comfortably sit in inherited properties and wonder why the plebs does not eat cake.
I believe in the free market, but the housing market is not free.
Zoning laws are not price fixing. Practically every dwelling in a zone has a different price on it, because of supply&demand.
[1] https://www.youtube.com/watch?v=LsUS3ynhAKY&feature=emb_logo
https://www.businessinsider.com/supply-and-demand-model-of-l...
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.
If people are less beholden to their current situation and more able to move freely, isn't it just as likely that rents will go down?
(Aside from the fact that plenty of places use mechanisms to control rents, if this is a real problem)
Just because [1] increases, doesn't necessarily mean [2] does.
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.