Comment by bryanlarsen

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.