3 ms·

A UBI of $x/month will just yield rent increases of $x/month.

danenania 3y ago
That depends on how it's paid for. If the money is printed, then yes. If it's raised through taxes, then not necessarily.
- ethanbond 3y ago
  It doesn’t depend on how it’s paid for. If I am a landlord and I know that my tenants now earn an additional $600/mo, and every other tenant in my market is also earning an additional $600/mo, I would be an idiot not to raise my rents by $600/mo, and so would every other landlord.
  - danenania 3y ago
    You're only considering the first order effect. A tax increase large enough to fund UBI would change the whole economy.
    - ethanbond 3y ago
      In ways that… mitigate rent increases? Say more what specific effect is relevant to this.
      - danenania 3y ago
        Well, you have the UBI increasing incomes at the lower end of the economy, which does apply upward pressure on lower-cost rents. But on the other side, you'd be decreasing the income/wealth at the top, which applies downward pressure at the high end of the market. The ultimate effect is not a straightforward calculation. I think the total size of the money supply is probably the most significant factor, and that wouldn't change if the UBI is funded by taxes.
        ethanbond 3y ago
        But then you’re talking about the effects of a high marginal tax rate, not UBI.
        danenania 3y ago
        I'm talking about the effects of wealth redistribution vs. money supply expansion. Redistribution doesn't necessarily increase prices since the total amount of purchasing power in the market doesn't change. It's certainly not as simplistic as "rent gets increased in proportion to the amount of the UBI" as you're implying.
        ethanbond 3y ago
        Taking into account redistribution, the story is even more bleak, not less. Lower income housing prices will rise faster than higher income housing prices.
        danenania 3y ago
        Why? What makes prices go up given a constant money supply?
        ethanbond 3y ago
        The ability to charge more? Analogous example in minimum wage increases: https://www.sciencedirect.com/science/article/abs/pii/S0094119021001030 https://www.sciencedirect.com/science/article/abs/pii/S00941... Evictions went down for 3 months, then rose again back to their prior levels as landlords increased rents.
        danenania 3y ago
        Again, it’s not clear that they’d be able to charge more given that less purchasing power for high income earners would push real estate prices (and therefore rents) downward. In the study you posted, it’s not possible to isolate the variable. Many things could have affected the (minor) changes in rents. Not a good analysis. Minimum wage increases purchasing power for the employed workers, but also increases unemployment, which has the opposite effect on prices.
    - YiraldyGuber78 3y ago
      True, instead of just the low-income earners dropping out now that they have an unconditional deposit in their bank every week, now you also have a significant number of middle and high income earners consciously choosing to earn less because of the crushingly high taxes.
      - ethanbond 3y ago
        And competing for housing with lower-income people.
  - judofyr 3y ago
    "Well, I'm a [store, café, bar, gym, etc] owner and I know that my customers now earn an additional $600/mo, and every other customer in my market is also earning an addition $600/mo, I would be an idiot not to raise my prices by $600/mo, and so would every other owner." "Oh, also, I'm building a new set of apartments and I discovered that when I set the rent to today's price + $300/mo then suddenly everyone was interested since everyone else on the market now takes +$600/mo." Yes, inflation is a real concern which should be discussed, but "duh, all the money will just go to X" is far too a simplistic argument.
    - ethanbond 3y ago
      Store, cafe, bar, gym owners will try to raise their prices, and they’ll succeed (obviously not everyone independently by the $UBI amount). But then ya know what will happen? The store, cafe, bar, and gyms’ landlords will raise their rent accordingly and eat approximately all of the gains that came from their price increases. Why on earth do you think rent is so expensive near high-productivity? The buildings aren’t better. The land itself isn’t higher quality. The landlords aren’t better. It’s more expensive because it can be due to the market’s productivity, and corollary ability to pay high prices.
bee_rider 3y ago
No it won’t, why would it?
- ethanbond 3y ago
  Rents are set by only two things: 1) the tenant markets’ ability to pay and 2) competition with other landlords. If every single landlord knows with certainty (2) that every single tenant in their market has increased their ability to pay (1) by $1000/mo, then every landlord independently will come to the conclusion that they can raise rents by $1000/mo. They know the tenants are able to sustain it, and they know other landlords know the same thing.
  - bee_rider 3y ago
    The landlords will still be in competition, anyone who breaks with the conventional wisdom will have an easier time getting tenants. It would probably raise prices, but the laws of supply and demand don’t just go away.
    - ethanbond 3y ago
      Huge amounts of the demand just moves $x up the price curve, but that doesn’t suddenly conjure supply into existence, so you have the same demand willing to pay higher prices across the same supply: that’s just higher prices. In HCOL areas the vast majority of rent prices stem from land rent, and that supply is not just less elastic than demand, it’s totally fixed. Most insidiously: the demand that will move most aggressively up the price curve is lower income people seeking better lower/middle income housing. So those prices will move the fastest.
      - bee_rider 3y ago
        You are making a lot of predictions from basic principles and very simple models, I’d be amazed if the market was really that simple.
        3y ago
jnwatson 3y ago
We already had a natural experiment for it over COVID. Rent didn't immediately go up. The price of everything went up sure to inflation. The Fed understands this. As soon as the checks start flowing, interest rates will rise to keep money supply flat.
- ethanbond 3y ago
  It’s not that great of a natural experiment given all the other dynamics of inflow/outflow from cities, money supply changes, and eviction moratoriums. Rent is higher than pre-COVID basically everywhere and they continue to rise faster than inflation so I’m not sure what this “experiment” shows.

That depends on how it's paid for. If the money is printed, then yes. If it's raised through taxes, then not necessarily.

ethanbond 3y ago
It doesn’t depend on how it’s paid for. If I am a landlord and I know that my tenants now earn an additional $600/mo, and every other tenant in my market is also earning an additional $600/mo, I would be an idiot not to raise my rents by $600/mo, and so would every other landlord.
- danenania 3y ago
  You're only considering the first order effect. A tax increase large enough to fund UBI would change the whole economy.
  - ethanbond 3y ago
    In ways that… mitigate rent increases? Say more what specific effect is relevant to this.
    - danenania 3y ago
      Well, you have the UBI increasing incomes at the lower end of the economy, which does apply upward pressure on lower-cost rents. But on the other side, you'd be decreasing the income/wealth at the top, which applies downward pressure at the high end of the market. The ultimate effect is not a straightforward calculation. I think the total size of the money supply is probably the most significant factor, and that wouldn't change if the UBI is funded by taxes.
      - ethanbond 3y ago
        But then you’re talking about the effects of a high marginal tax rate, not UBI.
        danenania 3y ago
        I'm talking about the effects of wealth redistribution vs. money supply expansion. Redistribution doesn't necessarily increase prices since the total amount of purchasing power in the market doesn't change. It's certainly not as simplistic as "rent gets increased in proportion to the amount of the UBI" as you're implying.
        ethanbond 3y ago
        Taking into account redistribution, the story is even more bleak, not less. Lower income housing prices will rise faster than higher income housing prices.
        danenania 3y ago
        Why? What makes prices go up given a constant money supply?
        ethanbond 3y ago
        The ability to charge more? Analogous example in minimum wage increases: https://www.sciencedirect.com/science/article/abs/pii/S0094119021001030 https://www.sciencedirect.com/science/article/abs/pii/S00941... Evictions went down for 3 months, then rose again back to their prior levels as landlords increased rents.
        danenania 3y ago
        Again, it’s not clear that they’d be able to charge more given that less purchasing power for high income earners would push real estate prices (and therefore rents) downward. In the study you posted, it’s not possible to isolate the variable. Many things could have affected the (minor) changes in rents. Not a good analysis. Minimum wage increases purchasing power for the employed workers, but also increases unemployment, which has the opposite effect on prices.
  - YiraldyGuber78 3y ago
    True, instead of just the low-income earners dropping out now that they have an unconditional deposit in their bank every week, now you also have a significant number of middle and high income earners consciously choosing to earn less because of the crushingly high taxes.
    - ethanbond 3y ago
      And competing for housing with lower-income people.
- judofyr 3y ago
  "Well, I'm a [store, café, bar, gym, etc] owner and I know that my customers now earn an additional $600/mo, and every other customer in my market is also earning an addition $600/mo, I would be an idiot not to raise my prices by $600/mo, and so would every other owner." "Oh, also, I'm building a new set of apartments and I discovered that when I set the rent to today's price + $300/mo then suddenly everyone was interested since everyone else on the market now takes +$600/mo." Yes, inflation is a real concern which should be discussed, but "duh, all the money will just go to X" is far too a simplistic argument.
  - ethanbond 3y ago
    Store, cafe, bar, gym owners will try to raise their prices, and they’ll succeed (obviously not everyone independently by the $UBI amount). But then ya know what will happen? The store, cafe, bar, and gyms’ landlords will raise their rent accordingly and eat approximately all of the gains that came from their price increases. Why on earth do you think rent is so expensive near high-productivity? The buildings aren’t better. The land itself isn’t higher quality. The landlords aren’t better. It’s more expensive because it can be due to the market’s productivity, and corollary ability to pay high prices.

bee_rider 3y ago

No it won’t, why would it?

ethanbond 3y ago
Rents are set by only two things: 1) the tenant markets’ ability to pay and 2) competition with other landlords. If every single landlord knows with certainty (2) that every single tenant in their market has increased their ability to pay (1) by $1000/mo, then every landlord independently will come to the conclusion that they can raise rents by $1000/mo. They know the tenants are able to sustain it, and they know other landlords know the same thing.
- bee_rider 3y ago
  The landlords will still be in competition, anyone who breaks with the conventional wisdom will have an easier time getting tenants. It would probably raise prices, but the laws of supply and demand don’t just go away.
  - ethanbond 3y ago
    Huge amounts of the demand just moves $x up the price curve, but that doesn’t suddenly conjure supply into existence, so you have the same demand willing to pay higher prices across the same supply: that’s just higher prices. In HCOL areas the vast majority of rent prices stem from land rent, and that supply is not just less elastic than demand, it’s totally fixed. Most insidiously: the demand that will move most aggressively up the price curve is lower income people seeking better lower/middle income housing. So those prices will move the fastest.
    - bee_rider 3y ago
      You are making a lot of predictions from basic principles and very simple models, I’d be amazed if the market was really that simple.
      - 3y ago

jnwatson 3y ago

We already had a natural experiment for it over COVID. Rent didn't immediately go up. The price of everything went up sure to inflation. The Fed understands this. As soon as the checks start flowing, interest rates will rise to keep money supply flat.

ethanbond 3y ago
It’s not that great of a natural experiment given all the other dynamics of inflow/outflow from cities, money supply changes, and eviction moratoriums. Rent is higher than pre-COVID basically everywhere and they continue to rise faster than inflation so I’m not sure what this “experiment” shows.