This one keeps rearing its ugly head:
"If we pay out a universal Citizen's Income at a flat rate to all adults, this will go straight into higher rents so landlords will be the only beneficiaries"
Clearly not true as it ignores the basic rent setting process (and it ignores the real world, in which UBI would be a straight swap for many existing welfare payments and tax reliefs, a few winners and losers, most households break even to within £10 or £20 a week). Clearly, a UBI, like nearly any type of government spending, good or bad, ist best funded out of LVT but that is a side issue.
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1. The main driver of rents is the extra income you can earn for a similar amount of effort by moving to a higher wage area. If you do not understand or accept this, go to jail, do not pass Go, do not collect $200.This is easily observable in the real world, what it boils down to is that the net disposable income, after paying rent, is pretty much the same all over the country.
2. In the lowest wage area, the location rent is always nil.* There are vast swathes land/housing, even in developed countries where the location rent/site premium is £nil i.e. where you can buy a house or flat for less than it would cost to build, or where some homes have been abandoned. This is easily observable in real life.
That is our fixed point, call it Town A, where average wages are £10,000 (or those in work earn £15,000 but one-third of adults are unemployed, for example).
People in Town B have average wages £11,000 (could be higher wages or lower unemployment/more jobs, doesn't matter).
People in Town A would like to earn that extra £1,000, so they are willing to move to Town B, provided the extra rent is no more than £1,000.
People in Town B would like to save rent by moving to Town A, but they know that wages are £1,000 lower, so they expect rents to be at least £1,000 lower in Town A (and at least £1,000 higher in Town B).
So the equilibrium point is where the location rent ion Town B is equal to the difference in average wages i.e. £1,000.
This applies to all areas up to Town Z, with the highest average wages in the whole country.
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OK, so let's imagine the government pays the UBI out of thin air, like some new royalty income (oil, 3G 4G 5G licences etc), so requires no change to taxation which would confuse the discussion.
Town A is still the least desirable area, so location rent is still nil. That is a fixed point.
Average wages (even including UBI) and rents in Town B are still £1,000 higher than in Town A, i.e. unaffected.
The incentive to move from Town A to Town B (higher wages) and to move from Town B to Town A (lower rents) are unchanged and still in the same equilibrium as before.
This applies all the way up the chain to Town Z, the highest wage area in the whole country.
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* Imagine an outdoor concert with so many rows of seats that there are more seats available than the number of people with even the slightest interest in seeing the show.
The front row seats will go for £100, the second row for £95, the price/value will drop slightly for each row further back, and so on until the seats are so far back that people aren't willing to pay anything for them (not even the price of the bus ticket to the venue) and the promoter can't even give them away.
The marginal location is the last row where people want to sit, even for free. Their location value is £nil. Any further in, and you'd have to pay at least £1. Any further out and there are no takers at all, as the last few people with an interest in the show have already taken a free seat in the back row.
Debate Magazine
