Geographic variation of rent (which drives the geographic varion of many other living costs) is a hard problem for any welfare scheme.
But where will we live – and how will we pay for it? These are questions housing and social security experts have been asking ever since the blueprint for the welfare state was laid out by Sir William Beveridge in 1942.
His system combined benefits at subsistence levels and others based on insurance contributions with action by the state to create the NHS, family allowances and full employment. But he admitted there was one problem even he could not solve: “The attempt to fix rates of insurance benefit and pension on a scientific basis with regard to subsistence needs has brought to notice a serious difficulty in doing so in the conditions of modern Britain. This is the problem of rent.”
Rents vary from place to place. If you pay a flat-rate allowance for housing, people in expensive areas will not have enough to pay the rent, while those in cheaper places will have a surplus. If you make it part of the insurance benefit, what is to stop people moving to an expensive house the moment they retire?
Beveridge hoped his new system of social security would mean the end of the hated means test. He tried to “make the most of a difficult situation” by proposing a flat-rate housing allowance on top of contributory unemployment benefit. After the war the government decided to meet actual housing costs but means test claimants. Housing benefit (soon to be absorbed into universal credit) did improve matters but it costs £25bn a year, is costly to administer and relies on means testing and steep withdrawal rates.
So what can supporters of UBI do? Many proposals simply ignore housing costs (and the equally difficult area of long-term sickness and disability) but that means retaining a means-tested allowance that undermines the simplicity that is meant to be one of the main points of the idea.
Another option is to include a flat-rate allowance for housing, possibly on a regional basis to reduce the worst anomalies. But that would still mean some people receiving more than their rent, while leaving others unable to pay for a decent home and at risk of homelessness. As Donald Hirsch argued in a report for the Joseph Rowntree Foundation last year: “It seems unlikely that a government would walk away from providing targeted support to those unable to afford acceptable housing, risking a return to slum conditions that were largely eradicated in the UK in the post-war years”.
So you kinda have your answer in that last para: a UBI that would target just the lowest possible rent (for a wide area, e.g. country) is suspected to create slums (in the richer areas thereof).
And for a sort-of similar solution (mostly just in name):
A report published by the Royal Society of Arts in December floated the idea of a “basic rental income” granted to everyone who rents rather than owns a property, and with the additional costs incurred by central government paid for through a land value tax. It certainly seems a neat solution to use one idea fashionable across the political spectrum to fix the problems with another one – but is it a bit too neat?
The truth is that the “problem of rent” is an even bigger headache today than it was for Beveridge. At the time he produced his report there was strict rent control in the private sector, and Britain was about to embark on a massive programme of council house building. Now rents vary even more from place to place and the government is more intent on selling social housing than building, at the same time as it complains housing benefit is “out of control”.
And you have to dig pretty deep in the report to get to the actual proposal on rents
The third option which the RSA proposes for further exploration is the introduction of a ‘Basic Rental Income’. The Basic Rental Income would not be income-contingent and therefore does not have the same disincentive or perverse incentive (eg family break-up) effects as housing benefit and council tax credit. A Basic Rental Income based upon local market conditions (and this would vary from year to year) would be granted to every individual who rented rather than owned a property. It could be linked to continuous residency (three years minimum say) to increase local cohesion. Local authorities would retain their statutory duty to house the homeless and should be given freedom to borrow and invest in new low-cost housing. The Support for Mortgage Interest Scheme for house-owners who are out of work would continue as now.
A Basic Rental Income would have cost implications. The source of funding for additional cost should be those who have gained the most from increases in housing equity. Philosophically, the justification for this has roots in Thomas Paine’s argument in favour of a ‘basic endowment’. The reason that there have been large gains for some in the housing market whilst others struggle is because our common institutions have failed to provide enough housing to enable affordable rents and housing ownership to be even more widespread. The introduction of a land value tax or similar to fund any shortfall in the Basic Rental Income is therefore justified on the basis of gains received by a few from the institutions of society and its collective action failures rather than through the individual’s endeavour.
This is a means of redistributing the economic rents that have arisen from the institutional structures of land and property. Some such as Adair Turner argues that cooling the housing market should be a ‘primary policy objective’ from an economic stability perspective. This policy would help quell some house price inflation as the demand for higher prices may be somewhat quelled.
Furthermore, both a land value tax and the Basic Rental Income together could provide for even more creative living spaces. Co-operatives could come together by aggregating Basic Rental Incomes giving power to individuals acting collectively to design these new creative living spaces. This opportunity could be open to all. The beauty of this system, in principle, is that the imposition of land value tax would release further land for development. The Basic Rental Income therefore becomes empowering in a way that Housing Benefit is not given its stigma and the lack of security it provides. This proposal could revolutionise the way many people live further enhancing freedom, creativity and security. A Basic Rental Income is for further modelling and exploration that is beyond the scope of this paper.
To me this BRI proposal doesn't answer some questions: what if it incentivises recipients to move to more expensive parts of the country? After all, life is probably better there in some ways, e.g. schooling might be better etc. I suspect such a scheme would accelerate some global demographic trends, increased urbanisation and depopulation of more rural areas. The proponents do envisage a sort of brake for this in the form of testing for length of residency etc. Whether that is a fair test is another matter.
A much more dramatic idea (basically communist IMO) is to complement UBI with a prohibition of private ownership of land, which would definitely solve the variation in rent... A "softer" version of this idea is to massively tax the land owners for the land value increase... The proponents of this argue that land owners reap value increases while doing almost nothing... And use these tax/funds to "fix" the housing market; not very clear to me how the latter part would be done; there's some vague talk of "going big" on UBI.
We’re running a project called New Thinking for the British Economy, and today an article by someone who is making the argument with UBI. The quote was, “Proponents of UBI need to go big or go home.”
I think what he meant is that by going big means that you need to take on this issue of ownership in the economy, kind of the root of the concentration of wealth. And that’s their agenda, and only by doing that will you really be able to get the UBI that is large enough, but also has acceptance that actually works.
And he was highlighting examples where he was quite worried that people are going straight in for the UBI or a halfway house UBI without touching the ownership stuff, and that, in his view, you could end up in not a very good place if you do that.
So you’re saying, yeah, go big and tackle the structural and make sure we go down that route. Otherwise, if it’s a kind of a halfway house UBI that doesn’t do that as well, then the outcomes you’re going to get aren’t going to be anywhere near as good. So it’s worth checking out, if you want to have a look at it.
The actual article that was published, doesn't quite have this title, but the "go big" is somewhere in there.
unless we are to engage in a radical economic transformation which drastically increases common ownership of economy, it is unlikely that Universal Basic Income on its own will do more than lock us into our current predicament. In the meantime, we need to look for equally radical policies which make a much more material difference to the lives of those on low incomes and who suffer from structural inequalities. Proponents of UBI need to go big or go home.
While this is still pretty vague, I guess you could read between the lines a proposal of Universal Basic Housing Ownership [I just coined this] or some such. Actually, a bit more googling found a proposal for Universal Basic Assets and [fairly predictably]
UBA should start with access to housing
And casting housing a service instead, a more concise proposal is for the state to provide rent-free housing under the umbrella of "universal basic services".